● Spokesperson Name: Kuo-Pin Weng Title: Head of Financial Division TEL: (02)2706-6006#190 Email: [email protected]

● Deputy Spokesperson Name: Ming-Wen Lee Title: Manager of Financial Division TEL: (02)2706-6006#125 Email: [email protected]

● Addresses and TEL of Headquarters, Branches and Factories Headquarters: 5F-6F., No. 77, Sec. 2, Dunhua S. Rd., Da’an Dist., Taipei City (02)2706-6006 1st Plant: No.271, Zhongshan N. Rd., Dayuan Dist., Taoyuan City (03)386-8081 2nd Plant: No. 12, Gongye Rd. 3, Guanyin Dist., Taoyuan City (03)483-8088 3rd Plant: No.937, Sec. 2, Chenggong Rd., Guanyin Dist., Taoyuan City (03)483-7682 4th Plant: No.399, Datan N. Rd., Guanyin Dist., Taoyuan City (03)473-7366 Pharmaceutical Factory: No. 12, Gongye Rd. 3, Guanyin Dist., Taoyuan City (03)483-8088 Electronic Chemical Factory: No. 12, Gongye Rd. 3, Guanyin Dist., Taoyuan City (03)483-8088

● Stock Transfer Agency Name: Share Transfer Agency Dept., Mega Securities Co., Ltd. Address: 1F., No.95, Sec. 2, Zhongxiao E. Rd., Zhongzheng Dist., Taipei City Website: https://www.emega.com.tw/emegaRegistrar/index.do TEL: (02)3393-0898

● CPA for the Financial Reports in the Most Recent Year Name: CPA Chia-Chien Tang and Ya-Ling Chen Accounting Firm: KPMG Address: 68F., No.7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City Website: https://home.kpmg/tw/zh/home.html TEL: (02)8101-6666

● Transaction location for overseas securities going listed: Not applicable

● Company Website: http://ecic.com

Financial Highlights

Revenue by B.U.

Pharmaceuticals 2%

Electronic Chemicals 11%

Toner 16% Color Chemicals 49%

Specialty Chemicals 22%

In Million NT$

Item 2018 2019

Revenues 9,621 9,332

Profit After Tax 408 349

Total Assets 13,858 13,623

Shareholder’s Equity 7,913 8,139

Earnings Per Share (in NT$) 0.73 0.66

Consolidated Revenues (In Million NT$) 12,000

9,537 9,451 9,621 10,000 9,169 9,332

8,000

6,000

4,000

2,000

0 2015 2016 2017 2018 2019

Consolidated Profit After Tax (In Million NT$) 800

700

600 574

500 474 408 400 370 349

300

200

100

0 2015 2016 2017 2018 2019

Contents

1 One. Letter to Shareholders I. 2017 Operating Performance II. Summary of 2018 Operation Plan III. Impacts of External Environment IV. Future Corporate Development Strategies

6 Two. Company Profile I. Date of Establishment II. Company History

8 Three. Corporate Governance Report I. Organization II. Directors, General Managers, Deputy General Managers, Associates and Managers of Each Department and Branch III. Status of Corporate Governance IV. Information of CPA’s Professional Fees V. Information of the Replacement of CPA VI. Disclosure of any instance of the Company’s chairman, general manager, and finance or accounting manager having held a position in the CPA firm or its affiliates VII. Equity transfer and equity pledge changes of directors, managers and shareholders with shareholding exceeding 10% VIII. Information of the shareholders with top 10 shareholding ratio and are related

to each other or spouses or within the kinship of the second-degree relatives IX. Comprehensive Shareholding Ratio

43 Four. Capital Overview I. Capital and Shares II. Issuance of Corporate Bonds III. Issuance of Preferred Stocks IV. Issuance of GDRs V. Issuance of Employee Stock Options VI. Issuance of New Restricted Employee Shares VII. Issuance of New Shares Upon any Merger and Acquisition With Other

Companies VIII. Implementation of Capital Allocation Plans

47 Five. Operational Profile I. Contents of Business II. Market and Production Profile III. Basic Information of Employees IV. Information of Environmental Protection Expenditure V. Labor Relations VI. Important Contracts

Six. Financial Information, Financial Performance Review and Analysis, And Risk 59 Management I. Condensed Balance Sheet and Comprehensive Income Statements II. Financial Analysis III. Audit Report of Audit Committee IV. Financial Turnover Difficulties for the Company and its Affiliates V. Financial Status VI. Financial Performance VII. Cash Flows VIII. Impact of Major Capital Expenditures on Financial Operations IX. Reinvestment Policy X. Risk Items XI. Other Important Matters

72 Seven. Special Disclosures I. Information Related to the Company's Affiliates II. Status of Private Placement of Securities III. Holding or Disposal of Shares in the Company by the Company's Subsidiaries IV. Other Necessary Supplementary Explanations V. Any occurrence of the Matters Defined in Term 2, Provision 2, Article 36 of Securities Exchange Act that Have a Significant Impact on Shareholders’ Equity or Security Price

79 Eight. Financial Report I. Consolidated Financial Report II. Individual Financial Report

Letter To Shareholders

Dear shareholders, Last year was a tumultuous year. The optimistic economic outlook for the first half of the year began to deteriorate around the third quarter. The operating revenue for the whole year of Everlight Chemical amounted to NTD9.33 billion, decreasing slightly by 3%. With the exception of the Color Chemicals Business that saw a growth of 1.7%, all other businesses suffered a decline. Net profit after tax amounted to NTD349 million, an annual decrease of 14%, whereas earnings per share amounted to NTD0.66, an annual decrease of 10%. The results of operation are analyzed as below: The sales revenue of the Color Chemicals Business amounted to NTD4.6 billion, accounting for 49%, and saw an annual increase of 1.7%. Traditional textiles, digital ink, leather, and pulp are the four major application domains. Last year, the paper dye and digital ink (including two major areas of digital textile and commercial printing) saw a sizeable growth, while traditional textiles dropped slightly. This year, we will continue our effort in launching differentiated commodities that are more eco-friendly, safe, energy and water conserving, as well as expanding our digital ink production. We will also expand our scale of operation in producing the chemicals for industrial and functional textiles, as well as dyes for metals. The sales revenue of the Specialty Chemicals Business Unit amounted to NTD2.06 billion, accounting of 22%, down by 4.9% as compared to the previous year. In March last year, a major explosion occurred at a chemical plant in Yancheng, Jiangsu Province. As a result, the Chinese government set to revamp the industrial safety and environmental protection rigorously, affecting part of the upstream supply of raw materials. Compounded by competitors actively lowering their pricing to our customers, the Specialty Chemicals Business Unit was unable to meet its yearly operating target. However, after years of endeavor, the sales of many high value adding light stabilizers underwent substantial growth, leading to a profit-making improvement last year. This year, the competition remains stiff. We will continue to adopt a differentiation strategy, and are actively charting to control the upstream raw materials. The sales revenue of the Toner business amounted to NTD1.51 billion, accounting for 16%, down by 7% compared to last year. Under many suppliers in China emerging and uniting to compete to put into production, the supply of Toner (particularly the black bulk products) has still exceeded the demand, and Toner prices continue to dip into red territory. In addition to launching products that can protect our market share, and continuing the development of color toners and high-speed copy machine toners, we have also developed new ceramic toners for industrial usage, in the hope of increasing profit. Since the beginning of the year, as the outbreak of Covid-19 virus occurred throughout China, our toner production line in Suzhou Industrial Park was shut down temporarily, drastically curtailing our operational capacity. Whereas, the order placed with our Taiwan production line remained consistent. For the outlook of future prospects, due to the global pandemic, it is difficult to remain optimistic. However, we will closely monitor the response and recovery of different countries toward the outbreak, so as to make good use of more business opportunities. The sales revenue of the Electronic Chemicals business amounted to NTD965 million, accounting for 11%, down by 11% compared to last year, mainly due to the decrease in the sales revenue generated by OEM products. Last year, our private brands saw many breakthroughs: the revenue from China grew strongly, and for the first time, I-line photoresist was successfully installed in 12-inch wafer; the use of masking tape in frameless screen

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continued to grow as well; newly launched photosensitive polyimide (PSPI) and low temperature photoresistant material that could be applied on flexible substrate was well received by customers. In addition, this year, we will continue to develop high-end photoresist in IC and thick film photoresist for electroplating in IC packaging. The sales revenue of the Pharmaceuticals business amounted to NTD 189 million, accounting for 2.0%, down by 16% compared to the previous year. In October last year, the factory under the Business Unit of Pharmaceuticals was once again inspected by the US FDA. Our team passed the inspection without the assistance of a consultant. As such, the confidence of our customers in us was boosted further. Despite loss of customers and deterioration of last year’s performance, from the fourth quarter onward, the orders for eye medicine began to increase gradually, and the customers of animal use medicine were returning as well. Meanwhile, Business Unit of Pharmaceuticals began to make plans to increase the lot size of multiple products, so as to meet requirements and increase product competitiveness, as well as promoting new markets to increase market share of its products. Business Unit of Pharmaceuticals will continue to seek to complete the project on radiopharmaceutical OEM products, and launch new products for prostaglandin to increase sales revenue. Last year, IMF had already projected the global economy in 2020 to be “in a synchronized slow-down,” while the Economist pointed out that from 2020 onward, the world would experience low growth for a decade. As the outbreak of Covid-19 virus since early this year developed into a global pandemic, many countries have closed their borders and imposed lockdown measures on cities, aggravating the economic growth. In addition to active engagement in epidemic prevention, we have also made adjustment to our planning in operating capital, including retaining liquidity and reducing dividend distribution, so as to brace ourselves in the coming economic downturn. The strategy of Everlight Chemical in 2020 is to “ Focusing growth engines and conquering challenges .” With a strong financial foundation, we shall target our growth engines, concentrating our resources to make the most of our opportunities. We will engage in practical measures, curtailing expenses and spending, so as to maximize our efficiency. We thank you for your support. With conviction, we shall overcome the economic hardship together.

Chairman Chen, Chien-Hsin

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I. 2019 Operating Performance (I) Implementation results of operating plan The Company’s consolidated operating revenue in 2019 was TWD 9,332,076,000 which was a decrease of 3%; in terms of operating income, the consolidated net income after tax was TWD 349,237,000, and EPS was TWD 0.66, wichich were reduced by 14% and 10% respectively comparing to previous year. (II) Budget execution status Unit: TWD thousand Account Plan for the whole year Actual amount Achievement rate

Operating revenue 11,000,000 9,332,076 85%

Operating cost 8,400,000 7,294,736 87%

Operating gross profit 2,600,000 2,037,340 78%

Operating expense 1,765,000 1,633,707 93%

Operating profit 835,000 403,633 48%

Net income before tax 800,000 456,070 57%

(III) Analysis on revenue and expense and profitability Unit: TWD thousand Item 2019 2018

Operating revenue 9,332,076 9,621,019

Operating cost 7,294,736 7,455,801

Operating gross profit 2,037,340 2,165,218

Operating expense 1,633,707 1,657,754

Operating profit Revenue and 403,633 507,464 expense Net non-operating revenue 52,437 12,080

Net income before tax 456,070 519,544

Income tax expense 106,833 111,624

Net income after tax 349,237 407,920

EPS (TWD) 0.66 0.73

ROA 3.1% 3.5%

ROE 4.4% 5.1%

Operating profit Profitability 7.4% 9.3% To paid-in capital Analysis Pre-tax income 8.3% 9.5%

Profit margin 3.7% 4.2%

EPS (TWD) 0.66 0.73

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(IV) R&D status Developing high-tech, high value-added chemical products, and continuously improving ecological benefits are our R&D goals. R&D expense in 2019 was about TWD 430,000,000, which accounted for 4.7% of operating revenue. The specific results of R&D are as follows: 1. Intellectual property right: In 2019, there were 5 patents granted. By the end of Feb. 2020, the cumulative number of patents was 174. 2. New product R&D results of each business: In 2019, the completed items of new products developed by each business are: 19 items of color chemicals, 7 items of specialty chemicals, 8 items of electronic chemicals, 39 items of toner, which are 73 items in total.

II. Summary of 2020 Operation Plan (I) Operation goals for the current year The Company adopts “Focusing growth engines and conquering challenges.” as its annual business policy, and implements the following strategies:

1. Making the most of opportunities: targeting growth engines, concentrating resources. 2. Maximizing efficiency: curtailing expenses and spending, simplifying procedures. (II) Expected sales volume and its reference According to the assessment of industrial environment and future market supply and demand, the expected sales targets of various products of the Company in 2020 are as follows: Business and product type Expected sales volume in 2020 Sales volume in 2019 Color chemicals 22,800 tons 20,939 tons Specialty chemicals 4,275 tons 3,624 tons Toner 8,000 tons 7,264 tons

Electronic Photoresist 409 tons 375 tons chemicals Others 7,350 tons 9,330 tons Prostaglandin 25,400 g 17,644 g Pharmaceuticals Other material 600 kg 627 kg medicines

(III) Important production and sales policy 1. Sales policy: (1) Brand: Promoting “Green Chemical Solution,” strengthening “Better Chemistry Better Life” to enhance brand recognition. (2) Profit: Expanding the sales of niche products, along with big-ticket low priced products to improve the sales portfolio and secure the overall profit. (3) Flexibility: Increasing the flexibility and expediting quotation process to retain customers and ensure the utilization rate of our factories. (4) Innovation: Using innovative marketing of “help customers cut cost” to increase customer satisfaction, overcoming hardship together. 2. Production policy (1) Safety: Construct safety culture and reduce disaster risk. (2) Environment: Promote circular economy and achieve environmental goals. (3) Flexibility: Integrate the resources of the plant area and exert production efficiency. (4) Innovation: Accelerate smart production and enhance ecological benefits.

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III. Impacts of External Environment (I) External competitive environment 1. The consolidation of multinational chemical companies to compete for market dominance will accelerate the adjustment of global industrial ecology. 2. Circular economy, commitment to zero emissions of harmful chemicals to the environment, and other similar initiatives to promote sustainability and environment protection will affect major global brands and their supply chain manufacturers. They will adjust their strategy and reallocation of resources, eliciting a new round of competition. 3. Many countries are tightening environmental protection and industrial safety regulations on chemical industry. The pressure becomes the “new norm,” accelerating the survival of the fittest within the industry and leading to changes in the industrial pattern on the supply side. In the short term, small and medium-sized chemical plants will be driven out one after another. Limited and halted production will cause a reduction in supply and a rise in prices. In the long term, medium and large-sized chemical plants that succeed in upgrading themselves will acquire strong competitive advantages and expand market share. 4. "Industry 4.0" has prompted the manufacturing industry to think about new business strategies and new business models. (II) Regulatory environment: 1. Countries have successively promulgated the Chemicals Management Act and strengthened management measures, in order to achieve the vision of the United Nations 2020 International Chemical Use Safety and Management. 2. With the advent of the global anti-tax avoidance era, multinational corporations must conduct tax management with a more highly-integrated thinking, and face the challenges in different aspects set by tax bureaus in each country in a stable manner, in order to reduce global tax risk. (III) Macroeconomic operating environment: 1. In 2020, market uncertainty will increase. The global economy is encountering three reversals in trend: Trump protectionism, stagnation of the European economy and the unstable growth of the Chinese economy. Due to shrinking of global trade, the economy might go into recession. Business operators should adopt a prudent and reserved attitude, and re-assess their position in the value chain. They should be more flexible and responsive in running the operation in facing new risks. 2. The increase in prices or volatility of raw materials, such as international oil prices, mainly due to trade warand geopolitical risks ratcheting up, requires our cautious response. 3. Information security risk will interfere with corporate operations, such as hacking, blackmailing viruses, corporate savvy data leakage, and negative network evaluation.

IV. Future Corporate Development Strategies Everlight Chemical's 2020 Green Gold Vision is to "become a global happy company that will continue to innovate and provide green chemical solutions", and focus on four major aspects: sustainable environmental protection, innovative value, integrity and happiness, and global partners for development. We strive to provide a better life for human beings and implement the brand promise of “Better Chemistry Better Life”.

5

Company Profile

I. Date of Establishment: September, 1972 II. Company History: 1972 ‧ The Company was established with capital amount 2011 ‧ Merged Anda Semiconductor Technology (Suzhou) Co., Ltd. of TWD 4 million. ‧ The material medicine of Prostaglandin, Misoprostol-HPMC, 1976 ‧ Purchased the land of Dayuan Industry Park in passed the inspection of EU GMP. Taoyuan City and set up the 1st Plant. ‧ Elected as one of the Top 100 Taiwan Brands. 1986 ‧ Purchased the CTCI Building on Dunhua S. Rd. in ‧ The 3rd Plant, also the bonded factory, went listed and Taipei City as the Group’s headquarters. formally began operation. 1987 ‧ Purchased the land of Guanyin Industry Park in ‧ Established Tianjin Branch of Everlight (Shanghai) Ltd. Taoyuan City and set up the 2nd Plant. ‧ Elected into the special edition of Taiwan Ethical Corporate 1988 ‧ Stocks went publicly listed with capital amount of Management Stories. TWD 0.5 billion. ‧ The first company to pass the GMP examination for food 1989 ‧ Established the company, Elite in Turkey. additives in Taiwan. 1991 ‧ Established Everlight U.S.A. ‧ Purchased the land of Taoyuan Technology Park in Taoyuan 1992 ‧ Purchased the land of Guanyin Industry Park in City and set up the 4th Plant. Taoyuan City and set up the 3rd Plant. 2012 ‧ Established Qingdao Branch of Everlight (Shanghai) Ltd. ‧ Established Everlight (Hongkong) Ltd. ‧ Established Suzhou Branch of Everlight (Shanghai) Ltd. 1993 ‧ Passed the Quality Management System ‧ Established Zhuhai Branch of Everlight (Suzhou) Advanced Examination of ISO 9002. Chemicals Ltd. 1994 ‧ Passed the Quality Management System ‧ Passed the Business Continuity Management System Examination of ISO 9001. (BCMS) Examination of BS 25999. 1995 ‧ Won the Excellent Prize of the 3rd Premium ‧ Introduced the inventory of product carbon footprint and Industry and Technology Development Award of passed the inspection of PAS 2050 and ISO/TS 14067. MOEA. ‧ Trend Tone Imaging won the Safety and Hygiene Role Model 1996 ‧ Passed the Environment Management System Award of MOEA. Examination of ISO 14001. 2013 ‧ Merged DailyCare BioMedical Inc. ‧ Established Everlight Europe B.V. (Netherlands). ‧ Established Evershine Investment Corp. ‧ Established the factory for raw material medicine. ‧ Won the 1st Potential Mittelstand Award of MOEA. ‧ Won the Excellent Manufacturer Prize of Energy ‧ The material medicine of Prostaglandin, Bimatoprost and Saving Award of Bureau of Energy, MOEA. Misoprostol-HPMC, passed the inspection of US FDA. 1997 ‧ Established the electronic chemicals factory. ‧ Won the Safety and Hygiene Role Model Award of MOEA. ‧ Established Everlight (Singapore) Ltd. ‧ Passed the Quality Management System Examination of ‧ Merged Trend Tone Imaging, Inc. ISO/TS16949. ‧ Continually won the Excellence in Corporate Social ‧ Won the Excellent Manufacturer Prize of Pollution Responsibility Award for seven years. Prevention Award of EPA. ‧ Everlight (Suzhou) Advanced Chemicals Ltd. passed the 1998 ‧ Established Ethical (Shanghai) Ltd. examinations of ISO 14001 and OHSAS 18001. 2000 ‧ Won the 8th Premium Industry and Technology ‧ Trend Tone Imaging passed the examinations of TOSHMS Development Award of MOEA.－ Excellent Prize CNS15066 and OHSAS 18001. 2001 ‧ Passed the Vocational Safety and Hygiene 2014 ‧ Passed the CG6008 General-Edition Corporate Governance Management System Examination of OHSAS System Evaluation of Taiwan Corporate Governance 18001. Association. 2002 ‧Established Ethical (Guangzhou) Ltd. ‧ Passed the Business Continuity Management System ‧ Established Business Unit of Nanomaterial. Examination of ISO 22301. ‧ The material medicine of Prostaglandin, ‧ Trend Tone Imaging passed the examination of ISO 14001. Misoprostol, passed the inspection of US FDA. ‧ Trend Tone Imaging passed the greenhouse gas inventory 2003 ‧ Approved by the MOEA to establish the inspection of ISO 14064-1. headquarters of business operation. 2015 ‧ Won the National Invention and Innovation Award of MOEA. ‧ Approved by the MOEA to establish High-Tech ‧ Established Audit Committee and Nomination Committee. Chemicals Research and Development Division. 2016 ‧ Reactive dye (Everzol Black-B 133%) passed the Material 2004 ‧ Won the Outstanding Corporate Citizen Award of Flow Cost Accounting inspection of ISO 14051 MFCA. MOEA. ‧ The 3rd Plant won the Work-Life Balance Award of MOL. ‧ Trend Tone Imaging passed the examination of 2017 ‧ The Plant IV was awarded the Green Building Label ISO 9001. certificate from the Ministry of the Interior. ‧ DailyCare BioMedical Inc. passed the examinations ‧ 2016 CSR Report passed the inspection of British Standards of ISO 9001, ISO 13485, GMP for pharmaceuticals Institution (BSI). and equipment and CAMCAS. ‧ Won the Taiwan TOP50 Business Sustainability Award and 2005‧ Established Everlight (Shanghai) Ltd. Business Sustainability Report Award.

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2006‧ Established Everlight (Suzhou) Advanced ‧ Trend Tone Imaging passed the Talent Quality-Management Chemicals Ltd. System (TTQS) Examination. ‧ Won the Industry Innovation Award of MOEA. 2018‧ We signed the Safe Partner Declaration with the 2007 ‧ The material medicine for cardiovascular disease, Occupational Safety and Health Administration, Ministry of Felodipine, passed the inspection of US FDA. Labor. 2008 ‧ Merged Everlight Honduras S.A (Honduras). ‧ The Plant IV obtained the Certificate of Cleaner Production 2009 ‧ Won the National Invention and Innovation Award Assessment and Green Factory Label from the Industrial of MOEA. Development Bureau. ‧ Won the Safety and Hygiene Role Model Award of ‧ We passed the verification of Taiwan Intellectual Property MOEA. Management System (TIPS) Grade A (Version 2016). ‧ Everlight (Suzhou) Advanced Chemicals Ltd. ‧ We won the China Dyestuff Centennial Merit Award, passed the examination of ISO 9001. Outstanding Entrepreneur Award, Science and Technology 2010 ‧ The 2nd Plant, also the bonded factory, went listed Contribution Award and Outstanding Enterprise Award of the and formally began operation. China Dyestuff Industry Association. ‧ Passed the examination of Taiwan Intellectual 2019‧ Won the 1st Green Chemical Application and Innovation Property Management System (TIPS). Award held by Environmental Protection Agency (EPA). ‧ Approved by the MOEA to establish Green Energy ‧ Passed the third party inspection for ISO 45001. High-Tech Chemicals Research and Development ‧ The administration building of the 1st Plant was awarded the Division. Green Building Label certificate from the Ministry of the Interior (for the renovation of existing buildings category). ‧ The 1st Plant passed the Cleaner Production Assessment by the MOEA. ‧ The 1st and 2nd Plants received Excellent Enterprise in Green Procurement Awards from Taoyuan City Government and EPA respectively. ‧ The 2nd Plant won the Excellency Award of River Adoption from Taoyuan City Government.

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Corporate Governance

I. Organization SBUs SBUs Business Unit of Color Chemicals Business Unit of Specialty Chemicals (I) Organization Business Unit of Electronic Chemicals Business Unit of Pharmaceuticals

Production unit Operation unit

Operation Unit 1 of Color Chemicals Operation Unit 2 of Color Chemicals Operation Unit 1 of Specialty Chemicals Audit Office Operation Unit 2 of Specialty Chemicals Operation Unit of Electronic Chemicals

General manager manager General Operation Unit of Pharmaceuticals \ Deputy General \ Deputy General Shareholders Chairman Directors Board of

’ manager Meeting

Production unit 1st Plant 2nd Plant 3rd Plant 4th Plant Electronic chemicals factory Pharmaceuticals factory Committee Committee Committee

CSR Committee and Management Ethical Corporate Risk Management Committee Quality Management Committee Committee Quality Management Committee Management and Safety Environmental, Health Committee Intellectual Property Right Management Business Continuity Committee Management Cyclical Economy Promotion Committee Committee Management and Personal Information Information Safety Committee Business Legal Management Compliance and Remuneration Committee Committee Remuneration A Nomination Committee udit Committee udit Committee Functional Division Office Research and Development Division General Manager Office Financial Division Human Resource Division Information Division Resource Management Division Environment, Health and Safety Division Logistic Division Product Responsibility Division

Elite Foreign Trading Inc. (Turkey) Everlight U.S.A.,Inc. Everlight (Hongkong) Ltd

Subsidiaries Everlight Europe B.V. (Netherlands) Everlight (Singapore) Pte.Ltd. Trend Tone Imaging, Inc. Ethical (Shanghai) Ltd. Ethical (Guangzhou) Ltd Everlight (Shanghai) Ltd. Everlight (Suzhou) Advanced Chemicals Ltd. Anda Semiconductor Technology (Suzhou) Co., Ltd. Shanghai Anda International Trading Co., Ltd. DailyCare BioMedical Inc. Evershine Investment Corp.

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(II) Business of major department Department Responsibility Audit Office Internal control audit business Business Unit of Color Operational business of products related to color chemicals Chemicals Business Unit of Operational business of products related to specialty chemicals Specialty Chemicals Business Unit of Operational business of products related to electronic chemicals Electronic Chemicals Business Unit of Operational business of products related to pharmaceuticals Pharmaceuticals Operation Unit 1 of Sales business of color chemicals in the Greater China area Color Chemicals Operation Unit 2 of Sales business of color chemicals in Europe, USA, Japan and Korea Color Chemicals Operation Unit 1 of Sales business of UV-stabilizer in the Greater China and East Asia Specialty Chemicals Operation Unit 2 of Sales business of UV-stabilizer in Europe, USA, Middle East, South Asia and Specialty Chemicals Africa Operation Unit of Sales business of electronic chemicals Electronic Chemicals Operation Unit of Sales business of pharmaceuticals Pharmaceuticals 1st Plant Production business of color chemicals and other products 2nd Plant Production business of color chemicals and other products 3rd Plant Production business of UV-stabilizer and other products 4th Plant Production business of green materials and other products Electronic chemicals Production business of electronic chemicals factory Pharmaceuticals factory Production business of pharmaceuticals Research and Business of product development and R&D in applied technology Development Division General Manager Office Planning for corporate development, and business of legal affairs and projects Business related to financial, accounting, investment management and Financial Division shareholder service Human Resource Business related to human resource Division Information Division Business of information and Internet planning and maintenance Resource Management Business of raw material and equipment procurement Division Environment, Health Business of environmental safety and hygiene and Safety Division Logistic Division Business related to delivery management of color chemicals finished goods Product Responsibility Business of product safety Division

9

II. Directors, General Managers, Deputy General Managers, Associates and Managers of Each Department and Branch (I) Director information Mar. 30, 2019 Other managers, directors or Nationality Date Shareholdings of spouse Shares held with supervisors with relationship of spouse Date Shareholding when elected Share number held currently Major working or elected for and minor children other person’s name Positions concurrently served in the Company or within the kinship of the second- Title Name Gender Elected / Term period (educational) experience registration the 1st and other companies degree relatives Appointed (Note) place time Shareholding Shareholding Share Shareholding Share Shareholding Share number Share number Title Name Relationship ratio ratio number ratio number ratio Chen, Director Ding- Chairman of companies such as Everlight Father and Director and Chuan Chen, Master of Public Health Chemical Singapore, Trend Tone Imaging, son Taiwan June 6, Jun. 6, 2018 - May 26, General Chen, Chairman Chien- Male (MPH), Harvard Daily Care BioMedical etc.; Director of Brothers R.O.C 2018 Jun. 5, 2021 1997 6,725,250 1.23 6,730,000 1.23 500,000 0.09 0 0 Manager Wei- Hsin University companies such as Elite Turkey and Good TV Brother-in- Associate Wang Broadcasting Corp, etc. law Manager Jason Ju Chen, Ding- Department of Director Chi Brothers International Trade, Chairman Chen, Father and Chen, Tamkang Junior College Chien- son Taiwan June 6, Jun. 6, 2018 - Aug. 26, Director and Director Ding- Male of English None Hsin Father and R.O.C 2018 Jun. 5, 2021 1972 81,000,000 14.79 73,000,000 13.33 7,800,000 1.42 0 0 General Chuan Honorary doctorate in Manager Chen, son Management, Chang Associate Wei- Father- and Jung Christian University Manager Wang son-in-law Jason Ju Chen, Ding- Chen, Brothers Taiwan June 6, Jun. 6, 2018 - Aug. 26, Doctor of Education, Director Chuan Director Ding- Male None Father and R.O.C 2018 Jun. 5, 2021 1972 14,975,254 2.73 14,375,254 2.62 1,167,659 0.21 0 0 Cohen University, USA Director Chen, Chi son Chien- Ming General Manager of Everlight Chemical, Chairman of companies such as Everlight Chen, (Hongkong) Ltd., Ethical (Shanghai) Ltd., Ding- Everlight (Shanghai) Ltd., Ethical (Guangzhou) Father and PhD in Industrial and Director Chuan Chen, Ltd., Everlight U.S.A., and Everlight Europe son Taiwan June 6, Jun. 6, 2018 - May 26, Operations Engineering, Chairman Chen, Director Wei- Male B.V. (Netherlands), and Director of companies Brothers R.O.C 2018 Jun. 5, 2021 2000 6,300,000 1.15 6,300,000 1.15 494,350 0.09 0 0 University of Michigan, Associate Chien- Wang such as Trend Tone Imaging, Inc., Everlight Brother-in- USA Manager Hsin (Suzhou) Advanced Chemicals Ltd.,Polytronics law Jason Technology Corp., Elite, Turkey, Anda Ju Semiconductor Technology (Suzhou) Co., Ltd., and Suzhou Sanyi. Chen, PhD in Mechanical Director and General Manager of Everlight Chen, Taiwan June 6, Jun. 6, 2018 - Jun. 8, Father and Director Chien- Male Engineering, University of U.S.A., and Director of Trend Tone Imaging, Director Ding- R.O.C 2018 Jun. 5, 2021 2006 3,503,192 0.64 3,803,192 0.69 0 0 0 0 son Ming Michigan, USA Inc. Chi Lee, Department of Public Taiwan June 6, Jun. 6, 2018 - May 26, Director Yung- Male Administration, National None None None None R.O.C 2018 Jun. 5, 2021 1994 2,281,007 0.42 2,281,007 0.42 201,672 0.04 0 0 Long Chung Hsing University Master in Science in Chairman and General Manager of Chung Hwa Ken, Taiwan June 6, Jun. 6, 2018 - May 26, Computer Science, Chemical Industrial Works, Ltd., and Director Wen- Male None None None R.O.C 2018 Jun. 5, 2021 2000 2,951,405 0.54 2,951,405 0.54 0 0 0 0 University of San Director of HONEST FINE CHEMICAL CO., Yuen Francisco LTD. Tsai, Master in Chemical Taiwan June 6, Jun. 6, 2018 - June 6, Director of companies such as Everlight U.S.A. Director Kuang- Male Engineering, University of None None None R.O.C 2018 Jun. 5, 2021 2018 312,636 0.06 312,636 0.06 0 0 0 0 and Everlight Europe B.V. (Netherlands) Feng Southern California, USA Wang, PhD in Engineering Executive Partner of GRC SINOGREEN, Independent Taiwan June 6, Jun. 6, 2018 - May 24, Hsiu- Male economic systems, Chairman of Sinogeenergy, and Independent None None None Director R.O.C 2018 Jun. 5, 2021 2012 00 000000 Chun Stanford University, USA Director of Swancor Holding Co., LTD. PhD in Commerce, Hung, Graduate Institute of Independent Taiwan June 6, Jun. 6, 2018 - May 24, Associate Professor, Department of Business Ying- Male Business Administration, None None None Director R.O.C 2018 Jun. 5, 2021 2012 00 000000 Administration, Tamkang University Cheng National Chengchi University Professor in Department of Accounting, NTU, Director of Taiwan Cooperative Financial Wu, PhD in Accounting and Holding Co., Ltd. (Representative of Ministry of Independent Taiwan June 6, Jun. 6, 2018 - June 11, Chung- Female Information Management Finance), Director of TWSE, Supervisor of None None None Director R.O.C 2018 Jun. 5, 2021 2015 00 000000 Fern and Systems, UCLA, USA Taiwan Cooperative Bank, Independent Director of Chunghwa Precision Test Tech.Co., Ltd.and Thai Kin Co., Ltd. Note1: If experiences related to the current position were undertaken in the accounting firm which takes charge of auditing or in affiliates during the period mentioned above, the titles and responsibilities shall be clarified. Note2: If the Company Chairman and the general manager, or manager of equivalent position (the highest manager) are the same person, or his or her spouse, or the kinship of the first degree, related information regarding the arrangement in term of reasons, rationale, necessity and response measures (e.g. increase the number of independent directors, and more than half of the directors do not concurrently serve as employees or managers and et cetera) shall be provided.

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Mar. 30, 2019 Whether or not have at least five (5) years of working Status of independence (Note) experience and the following professional qualifications Lecturer or Judge, public Required above in prosecutor, attorney- working Number of commerce, law, at-law, certified public experience Criteria public- finance, accountant, or other in listed accounting or professional or commerce, companies subjects required technical specialist law, finance, in which by the business who has passed a accounting 1 2 3 4 5 6 7 8 9 10 11 12 concurrentl of the Company national examination or other y served as in public or and been awarded a fields Name independen private colleges certificate in a required by t director or universities profession necessary the for the business of the business of Company. the Company. Chen, Chien-Hsin          0 Chen, Ding-Chuan          0 Chen, Ding-Chi          0 Chen, Wei-Wang         0 Chen, Chien-Ming          0 Lee, Yung-Long             0 Ken, Wen-Yuen            0 Tsai, Kuang-Feng            0 Wang, Hsiu-Chun              1 Hung, Ying-Cheng              0 Wu, Chung-Fern               2 Note: For the directors meeting any of the following situations two (2) years before being elected and during their term of office, please write “” in the appropriate corresponding boxes. (1) Not an employee of the Company or any of its affiliates. (2) Not a director or supervisor of any of the Company’s affiliates (however, being an independent director concurrently in the Company, its parent company, subsidiaries or subsidiaries of the same parent company in accordance with the Law or local regulations is not restricted here). (3) Not a natural-person shareholder or holder of shares, together with those held by a spouse, minor children, or held by the person under other names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranking within the top 10 in holdings. (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the managers mentioned in the paragraph (1) or persons mentioned in the paragraph (2), (3). (5) Not a director, supervisor, or employee of an institutional shareholder that directly holds five percent or more of the total number of issued shares of the Company, or ranks as its top five shareholders, or has designated representative in accordance of Article 27 Section 1 or 2 in the Company as director/supervisor (however, being an independent director concurrently in the Company, its parent company, subsidiaries or subsidiaries of the same parent company in accordance with the Law or local regulations is not restricted here). (6) Not a director, supervisor, or employee of other companies with the Board seats or more than half of the voting shares under control of one person (however, being an independent director concurrently in the Company, its parent company, subsidiaries or subsidiaries of the same parent company in accordance with the Law or local regulations is not restricted here). (7) Not a director, supervisor, or employee of other companies whose chairman or general manager are the same person or spouse of the Company (however, being an independent director concurrently in the Company, its parent company, subsidiaries or subsidiaries of the same parent company in accordance with the Law or local regulations is not restricted here). (8) Not a director, supervisor, manager, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the Company (however, if a specified company or institution possessing shareholdings of more than 20% and less than 50% of the total number of issued shares of the Company, and being an independent director concurrently in the Company, its parent company, subsidiaries or subsidiaries of the same parent company in accordance with the Law or local regulations is not restricted here). (9) Not a professional individual, or an owner, partner, director, supervisor, or manager or spouse thereof of a sole proprietorship, partnership, company, or institution that provides auditing services or for the past two years, has provided commercial, legal, financial, accounting or consultation services amounted to less than a cumulative NTD500,000 to the Company or to any affiliate of the Company. However, members of the Remuneration Committee, Public Tender Offer Review Committee or Special Merger and Acquisition Committee acting in accordance of Securities and Exchange Act or Business Mergers and Acquisitions Act are not restricted here. (10) Not having a marital relationship with, or not a relative within the second degree of kinship of any other director of the Company. (11) Not under any circumstances as noted in Article 30 of Company Act. (12) Not a governmental, juridical person or its representative as defined in Article 27 of Company Act.

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(II) General Managers, Deputy General Managers, Associates and Managers of Each Department and Branch Mar.30, 2020 Managers with relationship of Shareholdings of spouse Shares held with Major working Date Shareholding spouse or within the kinship of the Title and minor children other person’s name (educational) Nationality Name Gender Elected / Positions concurrently served in other companies second-degree relatives(Note3) (Note 1) experience Appointed Share Shareholding Share Shareholding Share Shareholding (Note 2) Title Name Relationship number ratio number ratio number ratio Chairman of companies such as Everlight (Hongkong) Ltd., Ethical (Shanghai) Ltd., Everlight (Shanghai) Ltd., Ethical PhD in Industrial and (Guangzhou) Ltd., Everlight U.S.A., and Everlight Europe B.V. Chen, Wei- Jan. 1, Operations (Netherlands), and Director of companies such as Trend Tone Associate General manager R.O.C Male 6,300,000 1.15 494,350 0.09 0 0 Jason JuBrother-in-law Wang 2001 Engineering, University Imaging, Inc., Polytronics Technology Corp., Elite, Turkey, Manager of Michigan, USA Everlight (Suzhou) Advanced Chemicals Ltd., Anda Semiconductor Technology (Suzhou) Co., Ltd., and Suzhou Sanyi. Master in Chemical Deputy General Tsai, Jan. 1, Engineering, University R.O.C Male 312,636 0.06 0 0 0 0 Director of Everlight Europe B.V. (Netherlands) None None None Manager Kuang-Feng 2010 of Southern California, USA Department of Deputy General Liao, Ming- Jan. 1, Business R.O.C Male 300,891 0.05 819 0.00 0 0 None None None None Manager Zhi 2010 Management, Tatung University Department of Fiber Chen, Deputy General Apr.1, and Composite R.O.C Chong- Male 174,521 0.03 44,309 0.01 0 0 Director of Everlight U.S.A. None None None Manager 2010 Materials, Feng Chia Kuang University Macromolecule Fiber, Deputy General Lin, Zhao- Jan. 1, R.O.C Male 71,691 0.01 270 0.00 0 0 NTUST None None None None Manager Wen 2013 Master Chairman of Everlight (Suzhou) Advanced Chemicals Ltd., Special Asst. to Du, Yi- Jan. 1, Master in Chemical R.O.C Male 13,989 0.00 9,951 0.00 0 0 and Director of companies such as Chung Hwa Chemical None None None Chairman Zhong 2019 Engineering, NTUST Industrial Works and Evershine Investment Corp., Master in Chemical Deputy General Chen, Qing- Jan. 1, R.O.C Male 14,037 0.00 0 0 0 0 Engineering, National None None None None Manager Tai 2019 Cheng Kung University PhD in Chemistry, Deputy General Chen, Ke- Nov.1, R.O.C Male 000000National Tsing Hua Director of Evershine Investment Corp. None None None Manager Lun 2019 University The 2nd Plant Yeh, Shun- Jan. 1, MBA, National Central R.O.C Male 1,157 0.00 43,792 0.01 0 0 None None None None Factory Director Xing 2020 University Huang, Jan. 1, Major in Commerce Associate Manager R.O.C Male 1,587 0.00 3,933 0.00 0 0 None None None None Zheng-Lung 1997 and Arts, TSVS Wu, Yao- Jan. 1, Major in Chemical Associate Manager R.O.C Male 3,370 0.00 0 0 0 0 None None None None Ming 2004 Fiber, NTUT Director and General Manager of Everlight (Suzhou) PhD in Environmental Advanced Chemicals Ltd., Director of companies such as Chen, Jan. 1, General Associate Manager R.O.C Jason Ju Male 281,824 0.05 6,405,000 1.17 0 0 Engineering, University Trend Tone Imaging, Anda Semiconductor Technology Wei- Brother-in-law 2005 manager of Delaware, USA (Suzhou), Shanghai Anda International Trading, and Wang Supervisor of Suzhou Sanyi. Tseng, Kun- Jan. 1, Major in Chemical Associate Manager R.O.C Male 26,053 0.00 0 0 0 0 None None None None Mu 2008 Engineering, NTUT Chen, Xin- Jan. 1, MBA, Chang Gung Associate Manager R.O.C Male 000000 None None None None Zhi 2012 University General Manager of companies such as Ethical (Shanghai) Liao, Nan- Jan. 1, Associate Manager R.O.C Male 7,214 0.00 20,717 0.00 0 0 Major in Fiber, NTUT Ltd. and Everlight (Shanghai) Ltd., and Supervisor of None None None Ming 2013 Everlight Chemical. Chen, Yi- Nov. 16, Department of Fiber, Associate Manager R.O.C Male 16,577 0.00 27,847 0.01 0 0 General Manager of Ethical (Guangzhou) Ltd. None None None Tang 2017 NTUST Master in Chemistry, Huang, Jan. 1, Factory Director of Everlight (Suzhou) Advanced Chemicals Associate Manager R.O.C Male 10,000 0.00 0 0 0 0 National Sun Yat-sen None None None Tsung-Wen 2018 Ltd. University Department of Wu, Tian- Jan. 1, Associate Manager R.O.C Male 105,107 0.02 0 0 0 0 Chemistry, Tunghai None None None None Wang 2002 University Department of Kang, The 3rd Plant Jan. 1, Chemical Engineering, R.O.C Yuan- Male 593 0.00 94,148 0.02 0 0 None None None None Factory Director 2017 Chung Yuan Christian Sheng University

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Managers with relationship of Shareholdings of spouse Shares held with Major working Date Shareholding spouse or within the kinship of the Title and minor children other person’s name (educational) Nationality Name Gender Elected / Positions concurrently served in other companies second-degree relatives(Note3) (Note 1) experience Appointed Share Shareholding Share Shareholding Share Shareholding (Note 2) Title Name Relationship number ratio number ratio number ratio Head of Operation Director of companies such as Everlight (Hongkong) Ltd., Hsiao, Jan. 1, MBA, Chinese Culture Unit 1 of Color R.O.C Male 13,063 0.00 14,800 0.00 0 0 Ethical (Shanghai) Ltd., Everlight (Shanghai) Ltd., and None None None Chong-Kun 2015 University Chemicals Ethical (Guangzhou) Ltd., etc. Head of Operation Lee, Fu- Jan. 1, MBA, Saint Louis Unit 2 of Color R.O.C Male 40,647 0.01 11,850 0.00 0 0 None None None None Xing 2017 University, USA Chemicals Head of Technical Lai, Bao- Jan. 1, MBA, Yuan Ze R.O.C Male 92,288 0.02 381 0.00 0 0 None None None None Marketing Division Kun 2002 University Head of Color Chen, Wen- Jan. 1, PhD in Fibe, University Chemicals R&D R.O.C Male 1,153 0.00 0 0 0 0 None None None None Zheng 2020 of Manchester,UK Division Head of Specialty PhD in Chemistry, Huang, Apr.1, Chemicals Technics R.O.C Male 14,087 0.00 0 0 0 0 National Tsing Hua None None None None Yao-Xing 2016 Division University Head of PhD in Chemistry, Pharmaceutical Chen, Si- Jun. 1, R.O.C Male 7,018 0.00 0 0 0 0 University of Maryland, None None None None Chemicals Q&C Feng 2019 USA Division Department of Head of Information Xue, Tzong- Jan. 1, R.O.C Male 9,118 0.00 0 0 0 0 Industrial Engineering, None None None None Division Yue 2010 Tunghai University Head of Resource Jul. 16, Major in Chemical Management R.O.C Sung, Bai-Li Male 148,812 0.03 4,534 0.00 0 0 None None None None 2012 Engineering, NTUT Division Master in Chemical Head of Product Huang,Hui- Jan. 1, Engineering, Chung Responsibility R.O.C Female 27,782 0.01 0 0 0 Chairman of Evershine Investment Corp. None None None Ching 2019 Yuan Christian Division University Master in Business Audit Office Tzeng, Mei- Oct. 1, R.O.C Female 10,633 0.00 1,514 0.00 0 0 Management, Tatung None None None None General Auditor Rong 2014 University Head of Financial Division Director of companies such as Everlight U.S.A., Everlight Department of and Supervisor of (Singapore) Ltd., Ethical (Shanghai) Ltd., Everlight Kuo-Pin Jan. 1, Business Financial and R.O.C Male 7,726 0.00 0 0 0 0 (Shanghai) Ltd. and Ethical (Guangzhou) Ltd., and None None None Weng 2010 Administration, Feng Accounting Supervisor of Trend Tone Imaging, Inc.,Evershine Investment Chia University Department Corp.

Note 1: Shall include information of general managers, deputy general managers, associate managers, and supervisors of each department and branch. Those whose positions equivalent with general managers, deputy general managers or associate managers shall also be disclosed no matter what the titles are. Note 2: If experiences related to the current position were undertaken in the accounting firm which takes charge of auditing or in affiliates during the period mentioned above, the titles and responsibilities shall be clarified. Note3: If the general manager, or manager of equivalent position (the highest manager) and the Company Chairman are the same person, or his or her spouse, or the kinship of the first degree, related information regarding the arrangement in term of reasons, rationale, necessity and response measures (e.g. increase the number of independent directors, and more than half of the directors do not concurrently serve as employees or managers and et cetera) shall be provided.

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(III) Remuneration to Directors, General Managers and Deputy General Managers in the Most Recent Year

1. Remuneration paid to directors (including independent directors): Unit: TWD thousand; thousand shares

Remuneration to directors Total remuneration Remuneration received for concurrently serving as employees Total remuneration Remuneration to directors (A+B+C+D) as a Wages, Bonuses and (A+B+C+D+E+F+G) as a Severance pay and Business execution expense (D) Severance pay and pensions Remuneration to employees (G) Whether receiving Remuneration (A)(Note2) (C) percentage of net income Special Disbursements, percentage of net income pensions (B) (Note 4) (F) (Note 6) remuneration from (Note 3) (Note 10) etc. (E) (Note 5) (Note 10) invested All companies in Title Name companies other All companies All companies All companies All companies in All companies All companies All companies in the financial All companies The Company than subsidiaries The in the financial The in the financial The in the financial the financial The in the financial The in the financial the financial statements The in the financial The Company The Company or parent company (Note 7) Company statements Company statements Company statements statements Company statements Company statements statements Company statements (Note 11) (Note 7) (Note 7) (Note 7) (Note 7) (Note 7) (Note 7) (Note 7) Cash Stock Cash Stock (Note 7) amount amount amount amount Chen, Chairman Chien- Hsin Chen, Director Ding- Chuan Chen, Director Ding-Chi Chen, Director Wei- Wang Chen, Director Chien- 2,935 2,935 Ming 3,605 3,605 0 0 9,657 9,657 (Illustration 1) (Illustration 1) Lee, Director Yung- Long 217 217 None Ken, 5.16 5.16 4,043 7,055 (Illustration 2) (Illustration 2) 138 0 138 0 6.38 7.21 Director Wen- Yuen Tsai, Director Kuang- Feng Chen, Director Chong- Kuang Wang, Independent Hsiu- director Chun Hung, Independent Ying- 0 0 0 0 0 0 2,520 2,520 director Cheng Wu, Independent Chung- director Fern 1. Please state the policy, system, standards and structure of independent directors’ remuneration, and describe the relevance to the amount of remuneration according to the responsibilities, risks, and time invested: The remuneration of the independent directors of the company is given to the board of directors after each new board of directors. After deliberation, it will be reported to the board of directors for approval. 2.In addition to those disclosed in the above statements, the remuneration paid to the Company’s directors (if serving as non-employee consultants) for providing service to all companies in the financial statements in the most recent year: None. Illustration 1: Business execution expenses include automobile and fuel expense; if there is a driver accompanied, the remuneration is TWD 1,165,000. Illustration 2: Severance pay and pensions belong to the expense recognition amount of severance pay and pensions.

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Table of Remuneration Range Name of Director Range of the Remuneration Paid to Each Director of the Total remuneration (A+B+C+D) Total remuneration (A+B+C+D+E+F+G) Company All companies in the financial statements All companies in the financial statements The Company (Note 8) The Company (Note 8) (Note 9) (I) (Note 9) (J) Wang, Hsiu-Chun, Hung, Ying-Cheng Wang, Hsiu-Chun, Hung, Ying-Cheng Wang, Hsiu-Chun, Hung, Ying-Cheng Wang, Hsiu-Chun, Hung, Ying-Cheng < TWD 1,000,000 Wu, Chung-Fern Wu, Chung-Fern Wu, Chung-Fern Wu, Chung-Fern Chen, Ding-Chuan, Chen, Ding-Chi, Chen, Chen, Ding-Chuan, Chen, Ding-Chi, Chen, Chen, Ding-Chuan, Chen, Ding-Chi, Chen, Chien- Chen, Ding-Chuan, Chen, Ding-Chi, TWD 1,000,000 (inclusive) ～ TWD 2,000,000 (exclusive) Chien-Ming,Lee,Yung-Long,Ken,Wen-Yuen, Chien-Ming,Lee,Yung-Long,Ken,Wen-Yuen, Ming,Lee,Yung-Long,Ken,Wen-Yuen, Lee,Yung-Long,Ken,Wen-Yuen, Tsai, Kuang-Feng Tsai, Kuang-Feng TWD 2,000,000 (inclusive) ～ TWD 3,500,000 (exclusive) Chen, Wei-Wang Chen, Wei-Wang Tsai, Kuang-Feng Tsai, Kuang-Feng TWD 3,500,000 (inclusive) ～ TWD 5,000,000 (exclusive) Chen, Wei-Wang Chen, Wei-Wang, Chen, Chien-Ming TWD 5,000,000 (inclusive) ～ TWD 10,000,000 (exclusive) Chen, Chien-Hsin Chen, Chien-Hsin Chen, Chien-Hsin Chen, Chien-Hsin TWD 10,000,000 (inclusive) ～ TWD 15,000,000 (exclusive) TWD 15,000,000 (inclusive) ～ TWD 30,000,000 (exclusive) TWD 30,000,000 (inclusive) ～ TWD 50,000,000 (exclusive) TWD 50,000,000 (inclusive) ～ TWD 100,000,000 (exclusive) > TWD 100,000,000

Note 1: The names of directors shall be listed separately (for corporate shareholder, the name of the corporate shareholder and its representative shall be listed respectively) and summarized for disclosure of each paid amount. Note 2: Refer to the remuneration paid to directors in the most recent year (including wage, position bonus, severance pay, and each kind of bonus and reward, etc.) Note 3: Fill in the director remuneration amount that is resolved to be distributed by the board in the most recent year. Note 4: Refer to the business execution expense of directors in the most recent year (including transportation, special disbursements, each kind of bonuses, and real objects such as dormitory and company cars, etc.) When houses, automobiles and other transportation tools or personal exclusive expenditure are provided, the characteristics and costs of the assets provided, rent of actual value or evaluated at fair value, fuel expense and other payments shall be disclosed. In addition, if there is a driver accompanied, please clarify the driver’s relevant remuneration in footnotes, which is not calculated into total remuneration. Note 5: Refer to those directors received from serving concurrently as employees (including general managers, deputy general managers, other managers and employees) in the most recent year, including wages, position bonuses, severance pay, each kind of bonuses and rewards, transportation expenses, special disbursements, each kind of bonuses, and real objects such as dormitories and company cars, etc.) When houses, automobiles and other transportation tools or personal exclusive expenditure are provided, the characteristics and costs of the assets provided, rent of actual value or evaluated at fair value, fuel expense and other payments shall be disclosed. In addition, if there is a driver accompanied, please clarify the driver’s relevant remuneration in footnotes, which is not calculated into total remuneration. In addition, the wage expense recognized according to IFRS 2 “Share-based Payment”, including obtaining employee stock option certificates, employee restricted new shares and participating in share purchases in capital increase by cash, etc., shall be calculated into total remuneration. Note 6: For the employee remuneration received by directors from serving concurrently as employees (including general managers, deputy general managers, other managers and employees) in the most recent year, the employee remuneration amount resolved to be distributed by the board in the most recent year shall be disclosed. Note 7: The total remuneration paid to the Company’s directors by all companies (including the Company) in the consolidated financial statements shall be disclosed. Note 8: For the total remuneration paid to each director by the Company, the director’s name shall be disclosed in the corresponding ranking. Note 9: The total remuneration paid to each of the Company’s director by all companies (including the Company) in the consolidated financial statements shall be disclosed, and the names of directors shall be disclosed in the corresponding ranking. Note 10: Net income refers to the net income after tax in the most recent year; for those having adopted IFRS, net income refers to the net income after tax in the individual financial statements in the most recent year. Note 11: a. This section shall state all forms of remuneration the director has received from the Company's invested businesses other than subsidiaries. b. For directors who receive remuneration from invested businesses other than subsidiaries, the amount of remuneration from these invested businesses should be added to column I in the table of remuneration ranges, and please change the column name into "All invested businesses" in such cases. c. The remuneration refers to any returns, compensation (including remuneration to employees, directors and supervisors) and professional fees, etc. which the Company's presidents and vice presidents have received for serving as directors, supervisors, or managers in invested businesses other than subsidiaries.

* The remuneration disclosed in this table is different from the income concept of the Income Tax Act, and thus this table is only for information disclosure but not for taxation.

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2. Remuneration to General Managers and Deputy General Managers: Unit: TWD thousand; thousand shares Total remuneration Severance pay and Bonus and special (A+B+C+D) as a Whether Salary (A) Amount of employee compensation (D) pensions (B) allowances, etc. (C) percentage of net receiving income (%) remuneration from invested Title Name All All companies in the All All All The Company companies companies financial statements companies The The companies in The companies in The other than in the Cash in the Company Company the financial Company the financial Stock Cash Stock Company subsidiaries or financial amount financial statements statements amount amount amount parent company statements statements Chen, General Wei- manager Wang Chou, De- Kang, Tsai, Kuang- Feng Liao, Ming-Zhi Chen, Chong- 904 904 2,856 2,856 Kuang 15,268 15,268 460 0 460 0 5.38 5.38 None Deputy (Illustration 1) (Illustration 1) (Illustration 2) (Illustration 2) Lin, Zhao- General Wen Manager Chen, Si- Feng Du, Yi- Zhong Chen, Qing-Tai Zhang, Wei-Min Chen, Ke- Lun Illustration 1: Severance pay and pensions belong to the expense recognition amount of severance pay and pensions Illustration 2: Bonuses and special disbursements include automobiles and fuel expenses. . Table of Remuneration Range

Range of the compensation paid to each general manager and Name of general managers and deputy general managers deputy general manager of the Company The Company All companies in the financial statements < TWD 1,000,000 Chen, Si-Feng,Zhang, Wei-Min, Chen, Ke-Lun Chen, Si-Feng, Zhang, Wei-Min, Chen, Ke-Lun TWD 1,000,000 (inclusive) ～ TWD 2,000,000 (exclusive) Chou, De-Kang, Chen, Qing-Tai Chou, De-Kang, Chen, Qing-Tai Chen, Wei-Wang, Tsai, Kuang-Feng, Liao, Ming-Zhi,Chen, Chen, Wei-Wang, Tsai, Kuang-Feng, Liao, Ming-Zhi,Chen, TWD 2,000,000 (inclusive) ～ TWD 3,500,000 (exclusive) Chong-Kuang, Lin, Zhao-Wen, Du, Yi-Zhong Chong-Kuang, Lin, Zhao-Wen, Du, Yi-Zhong TWD 3,500,000 (inclusive) ～ TWD 5,000,000 (exclusive) TWD 5,000,000 (inclusive) ～ TWD 10,000,000 (exclusive) TWD 10,000,000 (inclusive) ～ TWD 15,000,000 (exclusive) TWD 15,000,000 (inclusive) ～ TWD 30,000,000 (exclusive) TWD 30,000,000 (inclusive) ～ TWD 50,000,000 (exclusive) TWD 50,000,000 (inclusive) ～ TWD 100,000,000 (exclusive) > TWD 100,000,000

3. Name of managers receiving employee compensation and the distribution status: Total amount as a Title Name Stock amount Cash amount Total percentage of net income (%)

For the name list, refer to the information of general managers, deputy general managers, associate 0 1,343 1,343 0.37 managers and supervisors of each department.

Note : According to the Commission’s regulation of Tai-Qai-Zheng-Zi No. 0920001301 published on Mar. 27, 2003, the applicable range for managers is as follows: (1) General manager and those with equivalent ranking; (2) Deputy general manager and those with equivalent ranking; (3) Associate manager and those with equivalent ranking; (4) Supervisor of Financial Department; (5) Supervisor of Accounting Department; (6) Others with rights of management and signing for the Company.

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(IV) The comparison analysis of the ratio of remuneration paid from the Company and from all consolidated entities in the most recent two (2) years to the Company’s directors, general managers and deputy general managers to net income in the individual financial statement, and the illustration of remuneration policy, standards and packages, procedures of setting remuneration, and the linkage to operating performance and future risk exposure. (1) The ratio of total director remuneration to net income after tax increased by 0.26%, due to the drop in net income after tax as compared with the previous year. The ratio of total remuneration of general managers and deputy general manager to net income after tax increased by 0.66%, respectively, due to the drop in net income after tax as compared with the previous year. However, the total remuneration was lower than previous year. (2) According to the Company’s Articles of Incorporation, the Company’s director remuneration is authorized to be determined by the Board of Directors based on the director’s participation procedure in the Company’s operation and the value of contribution, no matter whether the Company has realized profit or loss. The standard of the industry is also taken into consideration when deciding director remuneration. A rational remuneration was approved by the Remuneration Committee and the Board of Directors.The directors are paid with fixed remuneration instead of variable remuneration. (3) According to the Company’s standards of remuneration, the wages and bonuses paid to general managers and deputy general managers is individually examined and discussed by the Remuneration Committee periodically and then sent to the Board of Directors for resolution, considering the manager’s position, contribution, performance and responsibility undertaken. If the Company has annual profit, the Remuneration Committee will propose the director remuneration and the amount and method of distribution (by cash or shares) of employee remuneration to directors and managers concurrently serving as employees in accordance with Articles of Incorporation, and then send them to the Board of Directors for resolution.

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III. Status of Corporate Governance (I) Operation status of the Board of Directors In 2019, the Board of Directors has convened 6 meetings (A), and the participation status of directors is listed below: Attendance in person Rate of attendance in person Title Name By proxy Notes (B) (%)(B/A) Chairman Chen, Chien-Hsin 6 0 100% Director Chen, Ding-Chuan 6 0 100% Director Chen, Wei-Wang 6 0 100% Director Chen, Chien-Ming 6 0 100% Director Tsai, Kuang-Feng 6 0 100% Director Chen, Ding-Chi 6 0 100% Director Lee, Yung-Long 6 0 100% Director Ken, Wen-Yuen 6 0 100% Independent director Wang, Hsiu-Chun 6 0 100% Independent director Hung, Ying-Cheng 6 0 100% Independent director Wu, Chung-Fern 6 0 100% Note: Date of election inauguration of the 17th term of Directors: June 6, 2018. Other items that shall be recorded: 1. The following situations did not occur during Board meetings: (1) Matters listed in Article 14-3 of the Securities and Exchange Act. (2) In addition to matters mentioned above, others that are opposed or reserved by the Independent Directors and have records or written statements. 2. Implementation status of Director’s avoidance of conflict of interest: (1) During the resolution by the 6th Meeting of the 17th Term Board of Directors on the compensation of the managerial officers as defined in the Securities and Exchange Act, two Directors - Chen, Wei-Wang and Tsai, Kuang-Feng both recused themselves from participating in discussion and voting due to their holding concurrent positions as managerial officers. (2) During the resolution by the 11th Meeting of the 17th Term Board of Directors on the year-end bonuses of the managerial officers defined in the Securities and Exchange Act, two Directors - Chen, Wei-Wang and Tsai, Kuang-Feng both recused themselves from participating in the discussion and voting due to their holding concurrent positions as managerial officers. 3. Evaluation on the Board of Directors: Please refer to the table below for details. 4. Measures undertaken during the current year and the most recent years in order to strengthen the functions of the Board of Directors and assessment of their implementation: (1) Strengthening the functions of the Board: To make the outside Directors have full participation in the development and discussions of the Company's important strategies, the development Strategy meeting of the Group was held on November 6th, 2019. The responsible heads of the Company's business were reporting to all Directors, and were discussing and forming a strategy together. It will be held annually thereafter. (2) Enhancing information transparency: Summary figures of quarterly earnings, dividends distribution and shareholders’ meetings are all published in the form of material information. Each month, when the self- cleared profit and loss is cleared, it is entered into the MOPS, in order to lower the gap between inside and outside information and provide it to investors for reference.

The execution status of evaluation on the Board of Directors Assessment Term of Scope of Assessment methodology Content of assessment period assessment assessment Once every Jan 1, 2019 The Board of The assessment shall be 1. Five major areas of the performance year to Dec 31, Directors, executed by the Secretary evaluation items of the Board of 2019 individual of Nomination Committee Directors: Directors, and via internal questionnaire. (1) Participation level in the Functional 1. Self-assessment of the Company’s operation. Committees performance evaluation (2) Improvement on the quality of of the Board of decision making of the Board of Directors: members of Directors. Nomination Committee (3) Composition and structure of the shall individually provide Board of Directors

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Assessment Term of Scope of Assessment methodology Content of assessment period assessment assessment assessment for 45 (4) Election and continued education evaluation items of the directors. pertaining to five major (5) Internal control. areas. 2. Six major areas of self-assessment 2. Self-assessment of of directors on self-evaluation: Directors on self- (1) Understanding of the goal and evaluation: all Directors mission of the Company. shall individually provide (2) Understanding of director’s assessment for 23 responsibilities. evaluation items (3) Participation level in the pertaining to six major Company’s operation. areas. (4) Management and communication 3. Self-assessment of the of internal relationship. performance evaluation (5) Professionalism and continued of Functional education of Directors. Committees: (6) Internal control. independent directors 3. Five major areas of self-assessment shall individually provide on the performance evaluation of assessment for 24 Functional Committees (Audit, evaluation items Nomination, and Remuneration): pertaining to five major (1) Participation level in the areas. Company’s operation. (2) Understanding of the responsibilities of Functional Committees. (3) Improvement on the quality of decision making of Functional Committees. (4) Composition and structure of Functional Committees. (5) Internal control.

(II) Operation of Audit Committee The Audit Committee of the Company comprises three Independent Directors. The Audit Committee shall assist the Board in fulfilling its overseeing responsibilities in relation to accounting, auditing, financial reporting process and quality and integrity in financial control. The matters under review of the Audit Committee for 2019 mainly include: 1. Audit of financial statements and accounting policies and procedures 2. Internal control system and related policies and procedures 3. Significant investment transactions 4. Report on the implementation of integrity management 5. Earnings distribution 6. Legal compliance 7. Whether or not the managerial officer and the Director have transactions with related parties and the possible conflicts of interest? 8. Complaint report

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9. Fraud prevention plan and fraud investigation report 10. Information security 11. Corporate risk management 12. Qualifications, independence and performance evaluation of Certified Public Accountants 13. Appointment or dismissal of Certified Public Accountants, or remuneration to there to. 14. Implementation of the responsibilities of the Audit Committee 15. Audit Committee performance evaluation self-assessment questionnaire Review of financial reports The Board of Directors prepared the Company's 2019 annual business report, financial statements and proposal for distribution of earnings, in which the Financial Statements have been audited by the commissioned CPAs, Chia-Chien Tang and Ya-Ling Chen of KPMG Taiwan, with an Independent Audit Report being issued. The above-mentioned annual business report, financial statements and proposal for distribution of earnings have been reviewed and determined to be correct and accurate by the Audit Committee. Evaluate the effectiveness of the internal control system The Audit Committee assesses the effectiveness of the policies and procedures of the Company's internal control system (including finance, operations, risk management, information security, outsourcing, compliance and other control measures) and reviews the Company's Audit Department and Certified Public Accountant, as well as the management's periodic reports, including risk management and legal compliance. Referring to the internal control system issued by the Sponsoring Organizations of the Treadway Commission (COSO) in 2013 – the Internal Control — Integrated Framework, the Audit Committee considers that the Company's risk management and internal control system are effective and that the Company has adopted the necessary control mechanisms to monitor and correct violations. Commissioned Certified Public Accountant The Audit Committee has been given the duty to supervise the CPA firm to ensure the fairness of the financial statements. In general, other than tax-related services or specially approved items, CPA firm is not allowed to provide other services of the Company. All services provided by CPA firm are required to be approved by the Audit Committee. To ensure the independence of the CPA firm, the Audit Committee has drawn up an independent assessment form referring to Article 47 of the Certified Public Accountant Act and the “integrity, Impartiality and objectivity and independence” of the Bulletins No. 10 of the Norm of Professional Ethics for Certified Public Accountant. It evaluates whether or not the CPA firm and the Company are related parties, have business with each other or have a relationship involving financial interests and others based on independence, professionalism and suitability of CPAs. The 10 th Meeting of the 2nd Term of the Audit Committee on December 12, 2019 and the 11 th Meeting of the 17th Term Board of Directors on December 12, 2019 reviewed and resolved that the two CPAs, Chia-Chien Tang and Ya-Ling Chen of KPMG Taiwan both met the standards for the evaluation of independence and are sufficient to act as CPAs for our financial statements. In the most recent year, the Audit Committee has held the meeting 5 times (A), with the Independent Directors present and in attendance as follows: Rate of attendance in Attendance in person Title Name By proxy person (%) Notes (B) (B/A)(Note) Convener Wu, Chung-Fern 5 0 100% Reelected Commissioner Wang, Hsiu-Chun 5 0 100% Reelected Commissioner Hung, Ying-Cheng 5 0 100% Reelected Note: The Audit Committee of the Company was established on June 11 2015, with 3 Committee members. Term of office of the (2nd Term) Commission members: June 6, 2018 to June 5, 2120. I. Operation of the year: (I) Matters listed in Article 14-5 of the Securities and Exchange Act.

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The Company's Board of Directors Resolution results of Audit Content of motion handling of the Date and Term Committee opinions expressed Proposal for 2018 Remuneration to Employees and Directors Proposal for 2018 Financial Statements Proposal for 2018 Earnings Distribution Proposal for Review on the Internal Control Self- assessment Results Motion of the Amendments to the Management Regulations for Acquisition or Disposal of Assets After the chair has inquired all March 28, 2019 All attending Directors attending commissioners, the The 17th Term Motion of the Amendments to the Regulations agreed and passed motion was passed without The 6th Meeting Governing Derivatives Transactions the motion. Motion of the Amendments to the Regulations objection. Governing Loaning of Funds and Making of Endorsements/Guarantees Motion of Handling the formulation of Standard Operating Procedures required by Directors Motion of 2019 Re-appointment of Certified Public Accountants for review on the Financial Statements

Motion of Equity Disposal of Invested Business, After the chair has inquired all May 9, 2019 All attending Directors Formosa Laboratories, Inc. attending commissioners, the The 17th Term agreed and passed motion was passed without The 7nd Meeting Motion of Self-Regulatory Rules on Disclosure of the motion. Merger and Acquisition Information objection. Report by the Board of Second Quarter 2019 Financial Statements Directors. Motion of Amending Articles of Association of Audit After the chair has inquired all Committee attending commissioners, the All attending Directors Motion of Ethical Corporate Management Best motion was passed without agreed and passed the Practice Principles objection. motion. Motion of Closing business and clearing of KEYSTONE PHARMACEUTICALS, INC. Independent director, Wang, August 8, 2019 Hsiu-Chun proposed to The 17th Term search for case studies of The 9th Meeting foreign companies securing channels as a reference for The resolution of the Proposal of Reinvestment on DailyCare transaction prices. Audit Committee was BioMedical Inc. After discussion, Director agreed by all attending Wang’s proposal was Directors unanimously agreed by the Committee and reported to the Board of Directors for discussion. Independent director, Wang, Hsiu-Chun proposed that purchases should be made via public auction procedure. The resolution of the November 7, 2019 Proposal to purchase equipment from subsidiary After discussion, Director Audit Committee was The 17th Term KEYSTONE PHARMACEUTICALS, INC. Wang’s proposal was agreed by all attending The 10th Meeting unanimously agreed by the Directors Committee and reported to the Board of Directors for discussion.

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Proposal for 2020 Internal Audit Plan After the chair has inquired all December 12, 2019 Proposal for 2020 Appointment of Certified Public All attending Directors attending commissioners, the The 17th Term Accountants for review on the Financial agreed and passed motion was passed without The11th Meeting Statements and their compensation the motion. objection. Disposal of long-term investment equity

(II) Other resolutions not approved by the Audit Committee but agreed by more than two-thirds of all Directors: None.

II. Implementation status of Independent Director’s avoidance of conflict of interest: None.

III. Communication between Independent Directors and internal audit supervisors and accountants is as follows (I) Independent Directors review monthly internal audit work reports and quarterly audit tracking reports. (II) The audit supervisor attended the 2019 of Audit Committee for five times, and all conducted separate business reports to Independent Directors, and fully communicated the implementation and effectiveness of the audit business. Date of Audit Committee Matters of communication Results meeting November 26, 2018 ~ February 28, 2019 Internal Audit Acknowledged. Business Execution Report. The motion was passed without March 28, 2019 Proposal for 2018 Management’s Reports on Internal Control objection, and was reported to to be Discussed. the Board of Directors for resolution. May 5, 2019 March 1, 2019 ~ April 20 Internal Audit Business Execution Acknowledged. Report. April 21, 2019 ~ July 15 Internal Audit Business Execution August 8, 2019 Acknowledged. Report. November 7, July 16, 2019 ~ October 10 Internal Audit Business Execution Acknowledged. 2019 Report. October 11, 2019 ~ November 25 Internal Audit Business Acknowledged. Execution Report. December 12, The motion was passed without 2019 objection, and was reported to The Company’s 2020 Annual Audit Plan Discussion. the Board of Directors for resolution.

(III) The accountants attended the 2019 Audit Committee for five times to report the review or review results and findings on Financial Statements to the Independent Directors. Date of Audit Committee Matters of communication Results meeting March 28, 2019 Report of the Review on 2018 Financial Statements Acknowledged. May 9, 2019 Report of the Review on the First Quarter 2019 Financial Acknowledged. Statements August 8, 2019 Report of the Review on the Second Quarter 2019 Financial Acknowledged. Statements November 7, Report of the Review on the Third Quarter 2019 Financial Acknowledged. 2019 Statements. December 12, No major motion Acknowledged. 2019 (IV) In normal times, the audit supervisor and the accountant may directly communicate with the Independent Director as necessary, and the communication goes well. (V) The Company also makes a disclosure of the communication between Independent Directors and internal audit supervisors and accountants on the Company’s website.

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(III) The state of the Company's implementation of corporate governance, any departure of such implementation from the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies, and the reason for any such departure Departure of such implementation from Implementation Status the Corporate Governance Best- Evaluation Item Practice Principles for TWSE/GTSM Listed Companies, Yes No Summary and the reason for any such departure I. Does the company follow the “Corporate V The practices were set up on Aug. 26, 2010, amended on Mar. 19, 2020, No discrepancy. Governance Best-Practice Principles for and disclosed on the company website and the MOPS. TWSE/GTSM Listed Companies” to establish and disclose its corporate governance practices? II. Shareholding structure and shareholders’ interests (I) Does the company set up internal V (I) The Company has designated dedicated personnel such as the supervisor No discrepancy. operation procedures for of Shareholder Service Room and the Company’s spokesperson, etc., recommendations, concerns, disputes, to handle the suggestions of shareholders or problems such as and litigation raised by shareholders, disputes. and implement such matters in accordance with the procedures? (II) Does the company have a roster of its major, actual controlling shareholders as V (II) The Company’s Shareholder Service Room regularly provides reports and No discrepancy. well as the ultimate controllers? statements and relevant information every quarter or during the (III) Has the company built and executed preparation period of shareholders’ meeting. risk management and firewall system V (III) The Company has formulated “Rules Governing Financial and Business No discrepancy. between the Company and its affiliates? Matters Between this Corporation and its Affiliated Enterprises” and “Rules Governing Transfer Pricing in Affiliated Enterprises” to control the transaction management, endorsements and guarantees, fund lending, etc., with its affiliates. In addition, the Company has defined the operation of “Supervision and Management on Subsidiaries” in the (IV) Has the company established internal “Internal Control System” and “Rules Governing Subsidiaries”, in order rules prohibiting insider trading on to implement its risk control mechanism on subsidiaries. undisclosed information? V (IV) The Company has formulated “Operating Procedures for Preventing No discrepancy. Insider Trading,” “Ethical Corporate Management Principles,” and “Procedures for Ethical Management and Guidelines for Conduct,” and volunteers to instantly publish its revenue and profitability information after clearance every month, which lowers the information gap of shareholders as much as possible and prevents insiders from seizing the opportunities of using unpublished information. The Company will also irregularly conduct reviews to meet the needs of the existing laws and regulations and practical management. The above-mentioned rules can be looked up from the Company’s website. III. Composition and responsibilities of the Board of Directors (I) Has the company established a V (I)1.The Company has formulated the Corporate Governance Principles and No discrepancy. diversification policy for the composition Procedures for Electing Directors, defined clearly the policy of board of its Board of Directors and diversity, and disclosed them on the company website. implemented it accordingly? 2.Among the name list of the Company’s 17th directors, there is one female member; those accompanied with operation judgement, business management, crisis handling ability, industry knowledge, international market view and leading and decision-making ability are Chen, Chien- Hsin, Chen, Ding-Chuan, Chen, Ding-Chi, Chen, Wei-Wang, Chen, Chien-Ming, Tsai, Kuang-Feng, Ken, Wen-Yuen, Lee, Yung-Long, and Wang, Hsiu- Chun; those accompanied with accounting and financial abilities are Chen, Ding-Chuan and Wu, Chung-Fern; those accompanied with management education ability are Hung, Ying-Cheng and Wu, Chung-Fern; those having contribution to the charity business are Chen, Chien-Hsin, Chen, Ding-Chuan, Chen, Ding-Chi, Chen, Wei- Wang, and Hung, Ying-Cheng; besides, Wu, Chung-Fern once served as a dedicated commissioner of FSC. 3.The Company’s Directors that is also an employee represented 27% of the total number of Directors, and Independent Directors represented 27%. One Independent Director has served for 4 to 6 years and two Independent Directors have served for 7 to 9 years. Two Directors are over 70 years old, four are between 60 and 69 years old and five are under 60 years old. In addition, gender diversity of the members of the Directors is important to the Company. Currently, the target for female Director seat is one, and for the actual status, there is one female Director, which meets the target. It comprises 9% of the total number of Directors. (II) Other than the Remuneration V (II) The Company volunteered to establish the Nomination Committee in Jun. No discrepancy. Committee and the Audit Committee 2015. which are established in accordance with laws, does the company plan to set up other functional committees? (III) Has the company established V (III) “Regulations for the Board Performance Evaluation” formulation has been The remuneration of methodology for evaluating the adopted by the Company through Board of Directors resolution on the company's performance of its Board of Directors, March 26, 2015. Each year, the regular assessments shall be directors depends on

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Departure of such implementation from Implementation Status the Corporate Governance Best- Evaluation Item Practice Principles for TWSE/GTSM Listed Companies, Yes No Summary and the reason for any such departure reported the evaluation result to the conducted by the Nomination Committee in accordance with the the company's Board of Director and used the result as Regulations for the Board Performance Evaluation, and for at least annual operating a reference on the consideration of three years conducted by an external institution. It has added the profit. individual directors’ remuneration and performance evaluation of the Functional Committee since 2018. In reelection nomination? March every year, the evaluation result will be reported by the Convener of Nomination Committee to the Board of Directors and serves as a reference for future reelection nomination. (IV) Has the company regularly evaluate its V (IV) Before the Company’s Board of Directors resolve to elect CPAs in the No discrepancy. auditor’s independence? end of each year, the independence of CPAs will be examined first, in which the Company will check if they are not the Company’s directors, shareholders or receive wages from the Company. At the same time, the CPAs will be checked if they are not stakeholders and have no other financial gains and business relationships with the Company except for receiving the fees for certificating and financial and tax cases. Once all of the above standards for independence have been met and the CPAs have provided the “Confirmation of independence,” the audit on the CPAs’ hiring and fees are then conducted. IV. As a public listed company, has the V The Company’s Board of Directors designated by the board of directors of No established of Company allocated competent the company is the Finance Div.. Responsible for providing the data needed corporate managers or sufficient number of by directors in executing business, holding board meetings and handling governance director managers to be in charge of corporate matters related to the meetings, preparing minutes of board meetings, and governance, and designated arranging matters related to on-the-job further study courses for directors. supervisors thereof to be in charge of corporate governance affairs (including but not limited to providing information required for business execution by directors and supervisors, assisting the Board and supervisors in legal compliance, handling matters related to the Board and shareholder meetings in accordance with laws, and producing handbooks of board meetings and shareholders meetings, and et cetera)? V. Has the company provided proper V The Company set up a “Stakeholder Engagement” section on the company No discrepancy. communication channels with website with specific window and contact information disclosed; maintains stakeholders (including but not limited proper communication channels with suppliers, clients, banks, investors, local to shareholders, employees, customers government and social group, etc.; actively contact or exchange visits with and suppliers, etc.), and created the parties thereof, to share various information with the stakeholders; and dedicated sections on its website to reply the queries of investors and others in correspondences. The Company address corporate social responsibility publishes quarterly journals of Everlight Chemical and Corporate Social issues that are of significant concern to Responsibility (CSR) Report on a regular basis, sharing the updates of the stakeholders? Company and responding to important issues concerning stakeholders. VI. Has the company appointed a V Yes; since Apr. 20, 2015, the Company’s shareholders’ meeting affairs have No discrepancy. professional shareholders service agent been outsourced to Share Transfer Agency Department of Mega Securities to process the affairs related to Co., Ltd. shareholders’ meetings? VII. Information disclosure (I) Has the company established a V (I) Company website: http://www.ecic.com.tw/ No discrepancy. company website to disclose information regarding its financial, operational and corporate governance status? (II) Does the company use other No discrepancy. (II) The Company has set up dedicated personnel in each department for information disclosure channels (e.g. V collection the Company’s information and sending to the Company’s maintaining an English-language spokesperson for disclosure; the “Operation Guidelines for Company website, designating staff to handle Spokesperson and Deputy Spokesperson” have been implemented information collection and disclosure, and operated for many years; before investor conferences, important appointing spokespersons, and information is released and published in accordance with regulations, webcasting investors conference to be and slides prepared in Chinese and English and videos will be uploaded put on the company website, etc.)? and disclosed on company website. (III) Does the Company publicly announce and file the annual financial reports V (III) The annual, first, second and third quarterly financial reports, and the Financial reports are within two months after the accounting monthly operating status report are all publicly announced and filed within still unable to be year-end, and publicly announce and file stipulated deadlines. made public at earlier the first, second and third quarterly dates. financial reports and the monthly operating status report before stipulated deadlines?

H. Has the company disclosed other V (I) Employee rights and care: No discrepancy. information to facilitate a better Please refer to the section for labor-employer relationship in the annual understanding of its corporate report. governance practices (including but not (II) Investor relationship: limited to employee rights, employee 1.The Company published conditions of operation and profitability every care, investor relations, supplier month, and has a spokesperson set up for answering the questions relations, rights of stakeholders, training asked by shareholders.

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Departure of such implementation from Implementation Status the Corporate Governance Best- Evaluation Item Practice Principles for TWSE/GTSM Listed Companies, Yes No Summary and the reason for any such departure of directors and supervisors, 2.On the company website (http://ecic.com), there is information of implementation of risk management investor relationship, news collection, quarterly journals of Everlight policies and risk evaluation measures, Chemical, CSR and stakeholders, providing information that investors implementation of customer relations care about. policies, and purchasing insurance for (III) Supplier relationship: directors and supervisors)? The Company establishes long-term, trusting and beneficial relationship with its suppliers based on the Company’s quality policy, environmental policy, and safety and hygiene policy; supports the spirit of green procurement and purchases from suppliers doing environmental protection well with priority; integrates the shipping mode of suppliers and utilizes information tools to lower carbon emission of the supply chain, enhance efficiency and transparency of procurement business; holds conferences and educational training programs for suppliers to advocate cyclical economics, green gold vision, sustainability operation and fulfilling CSR; requires contractors to obey the Management Rules in Safety and Hygiene for Contractors, in order to maintain the safety in the work place and the rights of employees. (IV) Rights of related parties: 1.Setting up the Technical Marketing and Service Department, assisting customers in the application of technology and problem solving, and conducting customer satisfaction survey every year. 2.Sticking to the principles of fair competition and reaching business goals with methods not violating business ethics. 3.Others: such as starting up group meetings of risk management to respond to the sudden changes of the economic environment, and continuously communicating with stakeholders such as customers, suppliers, and correspondent banks, etc., in order to maintain the rights of both parties. (V) On-the-job further study of directors: All directors meet the time requirement of on-the-job further study. (VI) Implementation status of risk control policies and risk measuring standards: The formulation of risk control policy has been resolved by the board in Nov.14, 2013; please refer to risk items. (VII) The Company’s purchase of liability insurance for directors: The Company has bought liability insurance for all directors and has reported on the board meeting on Aug. 8, 2019.

IX. Please state the corrective actions already taken and also propose the matters to be improved as the first priority and countermeasures against them, based on the corporate governance evaluation results released by the Corporate Governance Center of TWSE in the most recent year. (I)The result of corporate governance evaluation for 2018: The Company is in the top 6% to 20% of the listed company category. Improved items as compared to last year: A full and accurate disclosure is made in the Annual Report on the results of the Audit Committee's resolution on major proposals and the Company’s treatment of the opinions of the Audit Committee; the implementation of the Board members diversity policy by individual Directors is disclosed in the Annual Report and on the Company's website; each communication between Independent Directors and internal audit supervisors and accountants and the opinions of Independent Directors and the subsequent processing are disclosed on the Company website. (II) Matters to be improved as the first priority in 2019: Holding Annual Meeting of Shareholders before end of May; completing the English version annual report; holding investors conference twice every year; enacting human rights policy and disclosing on the Company website.

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(IV) Remuneration and the composition, responsibilities and operation status of Nomination Committee 1. Information about Remuneration and Nomination Committee members Number of public companies Committee member Criteria where the person holds the title Identity as a member of Remuneration Name Remuneration Nomination Committee Chairman Chen, Chien-Hsin 0 

Director Chen, Ding-Chuan 0 

Independent director Wang, Hsiu-Chun 1  

Independent director Hung, Ying-Cheng 0  

Independent director Wu, Chung-Fern 0  

Note: For whether or not have at least five (5) years of working experience, professional qualifications and status of independence, please refer to data of directors.

2. Information about the operations of Remuneration Committee (1) The Company’s Remuneration Committee consists of 3 members. (2) The term of the 4rd Committee members is from June 6, 2018 until June 5, 2021. The Committee has convened 5 meetings (A) during the most recent year. The qualification and participation of the commissioners are listed below: Rate of attendance in Title Name Attendance in person (B) By proxy Notes person (%) (B/A) Convener Wang, Hsiu-Chun 5 0 100%

Commissioner Hung, Ying-Cheng 5 0 100%

Commissioner Wu, Chung-Fern 5 0 100%

Other items that shall be recorded:

Operation of the year The Company’s handling of Date／Term Reasons for Discussion Resolution Results Member’s Opinions All attending Directors Proposal for 2018 Remuneration to All members agreed and agreed and passed the March 28, 2019 Directors passed the motion. motion. The 6th Meeting of the 2018 the compensation distribution All attending Directors 4th Term All members agreed and of the managerial officers defined in agreed and passed the passed the motion. the Securities and Exchange Act motion. Motion of salary of General Managers appointed at subsidiaries, All attending Directors All members agreed and Anda Semiconductor Technology agreed and passed the passed the motion. (Suzhou) Co., Ltd and Shanghai motion. Anda International Trading Co., Ltd. May 9, 2019 Motion of salary of Deputy General All attending Directors The 7st Meeting of the All members agreed and Manager of Business Unit of agreed and passed the 4th Term passed the motion. Pharmaceuticals motion. Motion of salary adjustment of Chen, All attending Directors Si-Feng, after re-assigned as Head All members agreed and agreed and passed the of Pharmaceutical Chemicals Q&C passed the motion. motion. Division Proposal for pension payment of All attending Directors All members agreed and Deputy General Manager, Chou, De- agreed and passed the passed the motion. August 8, 2019 Kang motion. The 8rd Meeting of the 4th The increase in the new Proposal for the promotion salary Term All members agreed and R&D Division supervisor was adjustment of the Company’s passed the motion. higher than the managerial officers recommended range of

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Remuneration Committee. After considering the responsibility in overseeing the R&D of the Group by the new supervisor, the Board passed the motion to follow original recommended increment by NTD 2,760 per month. Proposal for salary adjustment of the All attending Directors person in charge of the All members agreed and agreed and passed the November 7, 2019 Pharmaceuticals business after passed the motion. motion. The 9th Meeting of the 4th reassignment Term Proposal for pension payments of All attending Directors All members agreed and Head of Environment, Health and agreed and passed the passed the motion. Safety Division, Huang, Zhi-Kuan motion. Proposal for the promotion salary All attending Directors All members agreed and adjustment of the Company’s agreed and passed the passed the motion. managerial officers motion. All attending Directors December 12, 2019 Proposal for the Company’s annual All members agreed and agreed and passed the The 10th Meeting of the high-level bonus distribution passed the motion. motion. 4th Term Proposal for 2019 annual year-end All attending Directors bonuses distribution of the All members agreed and agreed and passed the managerial officers defined in the passed the motion. motion. Securities and Exchange Act

3. Information about the operations of Nomination Committee (1) The Company’s Nomination Committee consists of 5 members. (2) The term of the commissioners: the term of the 2st Nomination Committee began on Jun. 14, 2018 and ended on Jun.5, 2021. The Nomination Committee has convened five meetings (A) during the most recent year. The qualification and participation of the commissioners are listed below: Attendance in Rate of attendance in Title Name By proxy Notes person (B) person (%) (B/A) Convener Hung, Ying-Cheng 5 0 100% Commissioner Chen, Chien-Hsin 5 0 100% Commissioner Chen, Ding-Chuan 5 0 100% Commissioner Wang, Hsiu-Chun 5 0 100% Commissioner Wu, Chung-Fern 5 0 100% Responsibilities and operation status: The Nomination Committee of the Company has been established since 2015. In accordance with the Organizational Regulations for the Nomination Committee of the Company, the Committee members consist of three Independent Directors plus two other Directors. The Committee, with the authority of the Board of Directors, faithfully performs its functions with the care of a good administrator and submits its suggestions to the Board of Directors for discussion: I. Develop the standards for professional knowledge, technology, experience, gender and other diversification in backgrounds as well as independence required by Board members and senior managers, and to seek, review and nominate candidates for Directors and senior managers accordingly. II. Construct and develop the organizational structure of the Board of Directors and committees, conduct performance evaluations of Board of Directors, committees, Directors and senior managers, and evaluate the independence of Independent Directors. III. Set up with regular reviews on the continuing education plan for Directors and the succession plan for Directors and senior managers. IV. Lay down the Company’s Code of Practice on Corporate Governance. The Committee shall convene at least twice every year, and may call a meeting at its discretion whenever necessary.

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(V) Implementation of social responsibility and Departure of such implementation from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies and the reason for any such departure Departure of such implementation from Implementation Status the Corporate Social Responsibility Best Evaluation Item Practice Principles for TWSE/GTSM Listed Yes No Summary Companies and the reason for any such departure I. Has the Company adhered to V The Company has issued “Implementation of Risk No discrepancy Materiality Principle to conduct risk Management -Ensuring Sustainable Management” as its risk assessment on environmental, management policy and referred to Materiality Principle in the social and corporate governance implementation of risk assessment for environmental (E), issues related to its operations and social (S) and corporate governance (G) issues as shown in established relevant risk the table below. management policies or strategies? II.Does the company have a dedicated V The Company’s “Ethical Corporate Management and CSR No discrepancy (or concurrent) CSR organization Committee” is the unit dedicated for the promotion. The which is taken charge of by the senior Chairman serves as the chair commissioner. Four executive management under the authorization teams are also set up, which are in charge of corporate of the board and reports to the Board governance (promotion and improvement of systems related to of Directors? corporate governance), sustainable environment (promotion and improvement of systems related to sustainable development and environmental protection), social welfare (promotion of social welfare and character education), and ethical corporate management (promotion of systems related to ethical corporate management and forbidding of unethical behavior), respectively. Four senior managers are authorized to supervise them respectively. There are two meetings convened every year. In 2019, they were held on 5/24 and 12/25 respectively, each team reports content of work and reviews execution status. On 8/8, executive secretary reports execution results to the Board of Directors. III. Environmental Issues (I) Has the company set up an V The Company implements the Environment Management No discrepancy environmental management System of ISO 14001. The Company follows the environmental system that suits the industry policy of “cherishing the Earth's resources and complying with characteristics? environmental regulations”. The Company has passed the first examination of DNV-GL in 1996. Subsidiaries, Everlight (Suzhou) Advanced Chemicals Ltd. and Trend Tone Imaging, Inc., have also passed the examination in 2013 and 2014, respectively. (II) Is the Company committed to V The Company's product development, production and No discrepancy improving resource-using efficiency shipping with active focus onimproving atomic utilization rate, and to the use of renewable waste heat reuse, affluent and rainwater recycling and materials with low environmental recycled raw material utilization rate and so forth along with impact? the implementation of an Environmental Accounting System to measure specific performance. (III)Has the Company assessed the V The Company is deeply aware of the potential impact of No discrepancy potential risks and opportunities climate changes that could affect its operations and has that climate change may bring to therefore committed to relevant energy-saving and carbon- the Companyat present and in the reducing measures, developing and promoting more eco- future and adopted corresponding friendly products and establishing specific business continuity response measures? management programs for specific climate change risks such as blizzards or water hazards. (IV)Has the Company made an V And as such, the Company has already inventoried its total No discrepancy inventory of its total GHG emission GHG emission volume, water consumption and waste volume volume, water consumption and for the past two years and established its annual strategies for waste volume for the past two energy conservation and carbon reduction ratio, increasing years and established relevant water utilization rate, reducing total affluent discharge volume management policies for energy and plans for promoting cyclical economy to reduce total waste conservation, carbon reduction, volume. GHG reduction, water conservation and waste management?

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Departure of such implementation from Implementation Status the Corporate Social Responsibility Best Evaluation Item Practice Principles for TWSE/GTSM Listed Yes No Summary Companies and the reason for any such departure IV. Social Issues (I)Does the company set up policies V The Company has adhered to the International Labor No discrepancy and procedures in compliance with Organization (ILO)’s four fundamental principles and rights at regulations and internationally work and insisted on Everlight’s corporate culture, recognized human rights management philosophies and vision in becoming a Happy principles? Enterprise. In addition, the Company has also taken steps to ensure that all branches of global operation are compliant with local regulations and referred to standard human right policies adopted in relevant sectors to issue Everlight Chemical’s human rights policy on August 16, 2019 to be later promulgated at each plant in September during monthly meetings. In addition, relevant contents have also been disclosed on Everlight’s official website and quarterly (II) Has the company established and V publications. No discrepancy implemented reasonable employee Pursuant to Labor Standards Act, the Company has welfare measures (including wages, established specific procedures governing employees’ leaves leaves and other benefits) to reflect and established its Employee Welfare Committee to ensure its operational that reasonable measures for employee benefits are duly performance/successes in implemented. Furthermore, the Company has also employees’ remuneration? established relevant procedures including Procedures for Remuneration, Procedures for Year-End Bonus, Procedures for Performance Bonus, Procedures for Production Bonus to ensure the Company’s management performance is duly (III) Does the company provide V reflected in employees’ remunerations. No discrepancy employees with a safe and healthy The Company implements environmental 5S and equipment working environment, and regular TPM activities in the workplace to maintain the effective safety and health trainings? functions of the workplace cleanliness and equipment safety protection measures; it regularly implements education training and propagation on labor safety and health, organizes employee health check once a year, and arrange the physician to explain the report separately depending on the needs of employees. Please refer to the section of Labor (IV) Has the company established V Relations. No discrepancy effective career development The Company formulates educational training implementation training plans? methods and class training implementation regulations to (V) With regards to aspects of V cultivate employees' knowledge, skills and attitudes. No discrepancy customer health and safety, The Company's product packaging has a hazard label in customer privacy, marketing and accordance with the regulations of Global Harmonized labeling for the company’s products System (GHS). and services, has the company The Company requires that the goods supplied by the adhered to pertinent regulations and suppliers comply with the requirements of the hazardous international standards and substances in the "Raw Material's Hazardous Substances established relevant policies and Criteria" to protect end users in safely using the products of grievance procedures for the Everlight Chemical. protection of consumer rights? The Company has set up Division of Technical Marketing to provide customers with product-related services, assist customers in the application of technical support and problem solving, while accepting customer complaints from the final- (VI) Has the company established end-application on the products to protect customer rights, No discrepancy supplier management policies and conducts customer satisfaction survey every year. that require suppliers to comply The Company has established its supplier management

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Departure of such implementation from Implementation Status the Corporate Social Responsibility Best Evaluation Item Practice Principles for TWSE/GTSM Listed Yes No Summary Companies and the reason for any such departure with pertinent regulations relating policy, with the specific goal of “supervising suppliers to fulfill to issues of environmental their corporate social responsibilities and to achieve win-win protection, occupational safety through solid EHS measures, stable quality, punctual delivery, and health, labor rights and so competitive prices and quality services in the provision of raw forth and report their status of materials.” implementation? The CSR clause is included in the procurement contract of Resource Management Division to inform the supplier's compliance; the supplier assessment form is also included in the CSR assessment items. If the supplier violates, it will assess whether to purchase from suppliers. V. Has the company referred to V Based on the basic concept of continuous improvement, we No discrepancy internationally adopted reporting entrusted the independent notary unit, British Standards guidelines or initiatives in the Institution (BSI), since 2017. Conducting the 3rd-party preparation of its CSR Report and verification based on the AA1000 Assurance Standard (2008), other reports that disclose non- in order to ensure that the content we collect and compose is financial information of the in line with the core option standards of Global Resilience company? Has the aforementioned Report (GRI Standards), providing stakeholders with correct report been assured or guaranteed and complete information. by a valid 3rd-party validation organization? VI. If the Company has its own CSR principles based on the "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies", please describe the difference between its operation and that defined in the Principles: The Corporate Social Responsibility Principles for Everlight Chemical were formulated on March 28, 2013, and 3rd edition revised on March 19, 2020. the Implementation Team of Ethical Corporate Management and CSR Committee will promote the execution on a case-by-case basis in accordance with the Principles, and there is no difference. VII. Other important information that is beneficial to understanding the operation status of CSR: (I)Engagement in social welfare: The Company will appropriate at least 1% of after-tax earnings to the society every year, mainly for community education, social education, industrial development and public welfare activities, etc. Through in-kind donations, corporate volunteer services, community services, participation and sponsorship of charity events, school grants and academic research funds, the Company gives feedback to the community. The total amount of contributions for 2019 came to NTD 4,770,000 (accounting for 1.27% of the company’s profit after tax). Various categories of activity and amounts were as follows: Category of Community (Taoyuan) University/Social Industrial Religious Public Total activity Education and Activities Education Development Benefit Activities Amount (in NTD 175 135 38 129 477 10,000) (II)Promotion of children education: Sponsored Rainbow Family Life Education Association to organize the 8th “Discovering Taiwan’s Little Warriors of Life” - an event that was intended to help the selected group of children facing various difficulties in life to embrace positive thinking, cherish life and work towards their dreams. In 2019, a total of 30 courageous little warriors of life who demonstrated positive spirits in spite of adversity were chosen and commended. (III)Character formation begins at school: In 2019, we again held the 3-and-1/2 day Everlight Chemical Children’s Character Camp once again at Shulin Elementary School in Guanyin District, with Honesty and Courage as the theme of the camp to teach children to learn and cultivate the admirable qualities of “honesty and courage”. A total of 180 adults and children consisting of Everlight Chemical’s employees, their family members and volunteers and children participating together to promote Everlight Chemical’s character building activities. (IV)Care for the environment: 1. Everlight Chemical’s Plant II held Coastal Clean-Up Activities at Guanyin Beach on April 29, 2018 and September 28, 2018 to remove a lot of accumulated manmade wastes and restore the coast to its original state. Our colleagues and their families, about a hundred people enthusiastically participated in solid actions to support environmental protection and together protect

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Departure of such implementation from Implementation Status the Corporate Social Responsibility Best Evaluation Item Practice Principles for TWSE/GTSM Listed Yes No Summary Companies and the reason for any such departure the marine environment. At the end of the Coastal Clean-Up Activity, a total of 1,090 kilograms of garbage were picked up. The fishing port was given back a clean beach. 2. In conjunction with Taoyuan Department of Environmental Protection’s “Peach Blossom Spring & Water” initiative to adopt local rivers and bodies of water, Everlight Chemical’s Plant II adopted the section of Dajue River and received the distinction of “Outstanding Corporate Adoption of Rivers” on March 29, 2019. (V) Community care and feedback to the village: The impact of global climate change has produced extreme weather, which has caused the frequency of typhoons and rainfall in the flood season to hit new highs, causing great damage to the social environment. Driven by a commitment to humanitarian care and giving back to the community, Everlight Chemical’s Plant II signed a Memorandum of Cooperation with the nearby Shulin Village in 2017 in an effort to enhance the community’s disaster prevention capacity. The Company received the Trophy of Flood Control from Taoyuan City Government for its involvement. In 2019, the Company renewed the Memorandum once more with Shulin Village so as to continue helping the community to boost its disaster prevention capabilities. Note 1:If “Yes” has been checked as the status of operation, please describe the adopted material policy/strategy/measure and it state of implementation. If “No” has been checked, please provide a reason for its absence and describe the Company’s plan to adopt relevant policy/strategy/measure in the future. Note 2: For companies that have already compiled and prepared their CSR reports, they may opt to provide specific references to their CSR report and index pages for the reporting of operation status. Note 3: Material principles refer to issues pertaining to environment, society and corporate governance that stand to create significant impact on the company’s investors and other stakeholders.

Material Risk Assessment Items Risk management policy or strategy Issues The Company passed the ISO 14001 Environment Management System Accreditation in 1996 and has maintained effective operation ever since. In addition to adopting various management guidelines that help to facilitate our environmental policy of “cherishing the Earth’s resources and complying with Environment Environmental environmental regulations”, the Company has also introduced new environmental (E) Protection protection technologies that facilitate the promotion of waste water recycling and reuse to reduce total water consumption and affluent discharge. At the same time, the Company also continued to promote various energy-saving solutions to reduce GHG emission so as to further improve our environmental management performance. (1) The Company became accredited to OHSAS 18001 standard in 2001 and in 2019 passed the certification for ISO 45001 standards in an effort to adhere to the safety and health policy of “Respect for life and Pursue Zero Disasters”. By diligently implementing relevant guidelines and complying with pertinent regulations, the Company has made a conscious effort in eradicating hazards and reducing EHS risks to protect employees’ Corporate Commitment physical and mental health while promoting industrial safety. (2) The Company published its “Happiness Enterprise Declaration” in 2017 as a way to commit to the creation of a friendly workplace by offering “a sense of safety, belonging and honor” to all employees as the Company works towards becoming a happy Society enterprise, thereby allowing employees to share the fruits of the Company’s success (S) and enrich their lives. In 2013, the Company initiated its dedicated division for product liability while establishing procedures including the “Hazardous Chemical Substance Management Procedure” and “Product Safety Assurance System and Management Procedure” so that during product lifecycle of distribution and usage, our products will comply with registration regulations in Product Safety different countries, with minimal potential impact to end-users’ health and environment. Not only that, we also conform to the labeling requirements as stated in the Globally Harmonized System of Classification and Labelling of Chemicals (GHS) to ensure the safety of product transportation and usage.

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The Company has not only established a sound structure of corporate governance but also took steps to ensure due implementation of internal control. In addition, we have also referred to the ISO management structure to construct the Company’s “Legal Compliance Corporate Management System” to ensure that all employees and all relevant operations are legally Social Economy and Governance compliant. Legal Compliance (G) In 2018, the Company became accredited to Taiwan Intellectual Property Management System (TIPS)’s Level A certification, and this reflects the fact that on top of legal compliance and respecting other businesses’ intellectual properties, the Company has also made an effort to protect it’s key technologies.

(VI) Implementation Status of ethical corporate management and Departure of such implementation from the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and the reason for any such departure Departure of such implementation from the Implementation Status Ethical Corporate Management Best Evaluation Item Practice Principles for TWSE/GTSM Listed Yes No Summary Companies and the reason for any such departure I. Formulation of ethical corporate management policies and projects (I) Has the Company enacted ethical V (I) The Company has issued the "Ethical Corporate No discrepancy. management policies as per the Management Principles" and "Procedures for Ethical motion passed by the Board, and Management and Guidelines for Conduct," and detailed stated in its Memorandum or the policy of the Company's ethical corporate external correspondences about management in the annual report and CSR report. With the said policies, practices and the the business philosophy of integrity, transparency and commitment of the Board and responsibility, the Company developed a policy based on higher management in actively honesty and establish a good corporate governance and implementing the policies? risk control mechanism to create an operating environment of sustainable development; the Board of Directors and the management level actively implement the commitment of ethical corporate management policies, and require all employees of the Group to abide (II) Has the Company established V by. No discrepancy. evaluation mechanism for unethical (II) The Company has established a risk evaluation conduct, analyzed and assessed mechanism for unethical conduct, analyzed and operating activities that may assessed operating activities that may contain a higher contain a higher risk of unethical risk of unethical conduct on a regular basis, and provided conduct on a regular basis, and solutions for prevention of unethical conduct. provided solutions for prevention of unethical conduct, which at least comprise preventive measures for conducts as listed in Article 7 Section 2 of the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies”? (III) Has the Company specified V (III) The Company has specified relevant operating No discrepancy. relevant operating procedures, procedures, guidelines for conduct, “Reporting System behavioral guidelines, disciplinary for Violation of Ethical Corporate Management actions for violations and appeal Regulations” and the “Appeal System” in the solutions for system in the solutions for the the prevention of unethical conduct established, and prevention of unethical conduct implemented accordingly as stipulated. Those who are established, implemented found to have violated the regulations are punished accordingly, and review the according to the Company’s rules. The aforementioned aforementioned solution on a solution is reviewed on a regular basis. regular basis?

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Departure of such implementation from the Implementation Status Ethical Corporate Management Best Evaluation Item Practice Principles for TWSE/GTSM Listed Yes No Summary Companies and the reason for any such departure II. Implementation of ethical corporate management (I) Does the company evaluate the V (I) The Company has assessed the integrity record of the No discrepancy. integrity of all counterparts it has counter party. The terms of ethical behavior are specified business relationships with? Are in the signed contract. If any act of dishonesty is involved, there any integrity clauses in the the Company may terminate or dissolve the terms of the agreements it signs with contract at any time. business partners? (II) Does the company set up a unit V (II) The Company established a dedicated unit, “Ethical No discrepancy. dedicated to or tasked with Corporate Management and CSR Committee,” on Jan. 1, promoting the company’s ethical 2015. The Chairman serves as the chair commissioner. standards that reports directly to The “Ethical Management Team” is in charge of the the Board of Directors with promotion of relevant systems, the prohibition of periodical updates (at least once a dishonest behavior, and the proposal of improvement year) on ethical corporate suggestions. It also regularly Mar. reports to the Board of management policies, solutions for Directors about the system design and execution status the prevention of unethical conduct every year. and the status of supervision and execution thereof? (III) Does the company establish V (III) The Company has formulated a policy to prevent conflicts No discrepancy. policies to prevent conflict of of interest to identify, supervise and manage the risks of interests, provide appropriate conflicts of interest that may lead to dishonest behavior. communication and complaint It has also provided appropriate channels for directors channels and implement such and managers and other stakeholders attending the policies properly? Board of Directors to actively explain whether they have potential conflicts of interest with the Company. (IV) Has the company implemented V (IV) In response to the risk of higher dishonest behavior, the No discrepancy. the ethical management by Company has established an effective accounting and establishing an effective internal control system. The internal audit department accounting system and internal shall prepare an annual audit plan based on the risk control system, and had the assessment results, and report to the Board of Directors internal audit unit devised and the management level about the audit results and relevant audit plans according to subsequent improvement plans, in order to implement the evaluation result on risk of audit effectiveness. unethical conduct, as well as executing the said plan to inspect V the compliance of solutions for the prevention of unethical conduct, or appointed an external auditor to conduct audits? (V) Does the company provide (V) The Company regularly organizes internal education No discrepancy. internal and external ethical training and propagation on issues related to ethical conduct training programs on a corporate management every year, and arranges regular basis? relevant personnel to receive external training courses as needed. On May 9, 2019, the Board of Directors was updated on all the important regulations: prevention of insider trading, integrity management code, integrity operation procedures and behavioral guidelines, and other important regulations.

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Departure of such implementation from the Implementation Status Ethical Corporate Management Best Evaluation Item Practice Principles for TWSE/GTSM Listed Yes No Summary Companies and the reason for any such departure In the third quarter of 2019, via briefings and video clips, 25 monthly awareness improving meetings were held, training 2,309 employees of the Group, totaling 192 hours of training. III. The operating status of the company’s reporting system (I) Does the company establish V (I) The Company has issued a “Reporting System for After discussion, the specific complaint and reward Violation of Ethical Corporate Management Regulations,” Company temporarily procedures, set up conveniently which specifies the details of the reporting hotline：+886- excludes reward accessible complaint channels, 2-2326-3502 and mailbox：[email protected], and measures. and designate responsible clearly designates dedicated personnel as the individuals to handle the complaint responsible person of Ethical Management Team. Also received? set up the Audit Committee mailbox ： [email protected]. (II) Does the company establish V (II) The system of the preceding paragraph clearly defines No discrepancy. standard operating procedures for the procedures for handling reports and the confidentiality investigating complaints received, measures for relevant personnel. take follow-up measures after investigation, and implement confidentiality protocol? (III) Does the company adopt proper V (III)The Company shall keep the identity of the complainant No discrepancy. measures to protect a and the contents of the report confidential, and promise to complainant from improper protect the complainant from being improperly treated treatment for the filing of the due to their report. complaint? IV.Strengthening information disclosure V (I) Does the company disclose its The Company has disclosed the Ethical Corporate No discrepancy. guidelines on business ethics as Management Best Practice Principles on the company well as information about website and MOPS, and has disclosed the promotion results implementation of such guidelines on the company website. on its website and the Market Observation Post System (MOPS)? V. If the company has established corporate governance policies based on the “Corporate Conduct and Ethics Best Practice Principles for TWSE/GTSM-Listed Companies,” please describe any discrepancy between the policies and their implementation: No discrepancy. VI. Other important information for facilitating better understanding of the company’s implementation of Code of Ethics and Business Conduct: None.

(VII) If the Company has formulated Corporate Governance Principles and relevant regulations and articles, it shall disclose inquiry methods. Yes; please refer to the section of corporate governance on the company website (https://ecic.com/governance/regulation/) or Corporate Governance / Rules for Formulating Relevant Regulations of Corporate Governance on the MOPS (http://mops.twse.com.tw/mops/web/t100sb04_1).

(VIII) Other important information that is enough to enhance the understanding of the operation of corporate governance shall be disclosed together. The Company is a co-founder and permanent member of Taiwan Corporate Governance Association. The Chairman serves as the Supervisor of the Association. All directors of the Company are members of the Director and Supervisor Club founded by Taiwan Corporate Governance Association and definite members of the Association. They actively participate in various courses and forum activities of the Association to enhance their corporate governance concepts and grow from exchanging the experiences of corporate governance practices.

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(IX) Execution status of internal control system 1. Statement of internal control:

Everlight Chemical Industrial Corporation Statement of Internal Control System

Date: March 19, 2020 Based on the findings of the self-auditing, the Company states the following with regard to its internal control system during the year 2019: I. The Company knows that the board and the management are responsible for establishing, implementing, and maintaining the internal control system. The Company has established the system. It aims at providing reasonable assurance regarding the achievement of objectives in the effectiveness and efficiency of operations (including profitability, performance, and the safeguard of assets), reliability, timeliness and transparency of reporting, and compliance with all the applicable laws and regulations. II. The internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing its above 3 stated objectives. Moreover, the effectiveness of the internal control system may change due to changes in the environment and situations. Nevertheless, the internal control system of the Company contains self-monitoring mechanisms, and corrective action is taken whenever a deficiency is identified. III. The Company evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the “Regulations Governing the Establishment of Internal Control Systems of Public Companies” (herein below, the Regulations). The criteria adopted by the “Regulations” identify five components of internal control based on the process of management control: (1) control environment, (2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring. Each component further contains several items. Please refer to the “Regulations” for details. IV. The Company has evaluated the design and operating effectiveness of its internal control system according to the above-mentioned Regulations. V. Based on the findings of the evaluation mentioned above, the Company believes that, on December 31, 2019, its internal control system (including the supervision on and management of subsidiaries), as well as the design and operations of internal control systems for understanding its operational effectiveness and efficiency, the achievement level of objectives, reliability, timeliness, transparency and regulatory compliance in reporting, and compliance with the applicable laws and regulations, were effective, and the Company can provide reasonable assurance that the above-stated objectives would be achieved. VI. This Statement is an integral part of the Company’s annual report and prospectus and will be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Act. VII. This statement was passed by the Company’s board in their meeting held on March 19, 2020, with none of the 11 attending directors expressing dissenting opinions, and all of them affirming the content of this Statement.

Everlight Chemical Industrial Corporation

Chairman: Chen, Chien-Hsin

General manager: Chen, Wei-Wang

2. While entrusting an accountant to review the internal control system on project basis, the review report shall be disclosed: None.

(X) In the most recent year, up to the publication date of the annual report, where legal punishment imposed on the Company and its internal personnel, or the punishment imposed by the Company on its internal personnel due to violation of internal control regulations, which would affect the shareholders’ interests and

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the share price significantly, should have the content of the punishments, the main wrongdoings and improvements thereafter disclosed: None

(XI) Important resolutions of board meetings and shareholders’ meetings and the execution status of the resolved matters of shareholders’ meetings in the most recent year and up to the publication date of the annual report 1. Resolutions of the Board meeting: (1) Resolutions of the Board meeting on March 28, 2019: Approval of (1) Proposal for Reporting items of the 2019 Annual Meeting of Shareholders; (2) Motion of 2018 Remuneration to Employees and Directors; (3) Motion of 2018 Remuneration to Directors; (4) Motion of 2018 Remuneration to Managers Defined in Securities and Exchange Act; (5) Motion of 2018 Financial Reports; (6) Motion of 2018 Earnings Distribution; (7) Motion of Auditing on 2018 Self-Evaluation Result of Internal Control; (8) Motion of the Amendments to the Management Regulations for Acquisition or Disposal of Assets; (9) Motion of the Amendments to the Regulations Governing Derivatives Transactions; (10) Motion of the Amendments to the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees; (11) Motion of the Amendments to the Articles of Association; (12) Motion of the Revision of the Agenda of the Company’s 2019 Annual Meeting of Shareholders; (13) Motion of the Revision of the Code of Corporate Governance; (14) Motion of the Amendments to the Regulations for the Board Performance Evaluation; (15) Motion of Handling the formulation of Standard Operating Procedures required by Directors; (16) Motion of 2019 Re-appointment of Certified Public Accountants for review on the Financial Statements; (17) Motion of renewal of the subsidiary of Suzhou Everlight Chemical’s General Manager; (18) Motion of renewal of the subsidiary of Shanghai Mingde/Dehua Everlight Chemical’s General Manager. (2) Resolutions of the Board meeting on May 9, 2019: Approval of (1) disposal of shareholding of reinvestment business, Formosa Laboratories, Inc.;(2) proposal for purchase of liability insurance for Directors and key employees;(3) amendment of self- disciplined disclosure of merger and acquisition regulation;(4) re-appointment of the Deputy General Manager of Business Unit of Pharmaceuticals ;(5) appointment of General Managers of subsidiaries, Anda Semiconductor Technology (Suzhou) Co., Ltd and Shanghai Anda International Trading Co., Ltd. (3) Resolutions of the Board meeting on May 30, 2019: Approval of (1) the ex-dividend record date for shareholders’ cash dividends will be June 30, 2019 and distribution date will be July 17, 2019. (4) Resolutions of the Board meeting on August 8, 2019: Approval of (1) proposal for application to banks for medium-term credit loan limit;(2) motion of amendment of the Organizational Regulations of Audit Committee;(3) motion of amendment of CSR Principles;(4) motion of disposal of reinvestment business, DailyCare BioMedical Inc.;(5) motion of liquidation of Keystone Pharmaceuticals Inc.;(6) motion of pension payments of Deputy General Manager Chou;(7) motion of appointment of Deputy General Manager of Research and Development Division;(8) motion of adjustment of salary of personnel above the level of Associate Managers;(9) motion of appointment of director of subsidiary, DailyCare BioMedical Inc. (5) Resolutions of the Board meeting on November 7, 2019: Approval of (1) motion of purchase of equipment from subsidiary, Keystone Pharmaceuticals Inc.;(2) motion of appointment of person in charge of Business Unit of Pharmaceuticals;(3) motion of appointment of Chairman of subsidiary, Suzhou Everlight Chemical;(4) motion of appointment of director and chairperson of subsidiary, Evershine Investment Corp.;(5) pension payments of Head of Division Huang. (6) Resolutions of the Board meeting on December 12, 2019: Approval of (1) proposal for operational plan and 2020 Operation Plan and Business Budget; (2) proposal for 2020 Internal Audit Plan;(3) proposal for 2020 the bank loan limit;(4) proposal for 2020 appointment of Certified Public Accountants for review on the Financial Statements and their compensation;(5) proposal for convening the Annual Meeting of Shareholders on May 28, 2020;(6) proposal for the period and places for 2020 Annual Meeting of Shareholders to accept proposals from shareholders;(7) proposal for disposal of shareholding of long term investment;(8) proposal for the promotion of the personnel above the level of Associate Managers;(9) proposal for annual year-end bonuses of the managerial officers defined in the Securities and Exchange Act.

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(7) Resolutions of the Board meeting on March 19, 2020: Approval of (1) proposal for reporting items of the 2020 Annual Meeting of Shareholders;(2) motion of 2019 Remuneration to Employees and Directors;(3) motion of 2019 Remuneration to Employees and Directors;(4) motion of 2019 Remuneration to Managers Defined in Securities and Exchange Act;(5) motion of 2019 Financial Reports;(6) motion of 2019 Earnings Distribution;(7) the ex-dividend record date for shareholders’ cash dividends will be June 23, 2020 and distribution date will be July 15, 2020;(8) motion of Auditing on 2019 Self-Evaluation Result of Internal Control;(9) motion of amendment of rules of shareholder meetings;(10) motion of amendment of rules of Board meetings;(11) motion of amendment of the Organizational Regulations of Audit Committee;(12) motion of amendment of the Organizational Regulations of Remuneration Committee;(13) motion of amendment of Corporate Governance Principles; (14) motion of amendment of CSR Principles;(15) motion of enactment of Ethical Corporate Management Best Practice Principles and Behavioral Guidelines;(16) motion of the Revision of the Agenda of the Company’s 2020 Annual Meeting of Shareholders;(17) motion of extending loan of USD5,000,000 to subsidiary, Everlight (Suzhou) Advanced Chemicals Ltd.;(18) motion of cancellation of Non-competition Restriction on the independent directors of the Company;(19) motion of pension payments of Deputy General Manager Chen;(20) motion of appointment of Deputy General Manager of Color Chemicals Business Unit;(21) motion of appointment of director of subsidiary, Everlight U.S.A.;(22) motion of pension payments of General Manager of subsidiary, Trend Tone Imaging, Inc.;(23) motion of renew of appointment of General Manager of subsidiary, Trend Tone Imaging, Inc. 2. Implementation of the resolutions of the 2019 Annual Meeting of Shareholders (1) Approval of 2018 Annual Business Report and Financial Statement. (2) Approval of motion of 2018 Earnings Distribution; earnings were distributed to shareholders on July 17, 2019, with a cash dividend per share of NTD 0.5. (3) Approval of motion of the amendments to the Management Regulations for Acquisition or Disposal of Assets, the Regulations Governing Derivatives Transactions, the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees. The amendments are disclosed on company website and executed thereafter. (4) Approval of motion of the amendments to the Articles of Association. Approval was given by MOEA on June 20, 2019 and is disclosed on company website.

(XII) Recorded or written statements made by any director who specified dissent to important resolutions passed by the Board of Directors during the most recent year and up to the date of publication of the annual report: None.

(XIII) A summary of the resignation status of Chairman, General Manager, Accounting Supervisor, Financial Supervisor, Internal Audit Supervisor, managing supervisors and R&D Supervisor in the most recent year, up to the publication date of the annual report: Date of Reasons of resignation or Title Name Date of dismissal appointment dismissal Deputy General Chou, De- January 1, 2005 November 1, Retirement Manager of Kang 2019 Research and Development Division

IV. Information of CPA’s Professional Fees

Range Table of CPA’s Audit Fee Unit: TWD thousand Fee Audit fee Non-audit fee Total Amount range 1 0 ～TWD 1,999,999 950 950 2 TWD 2,000,000 ～TWD 3,999,999 3,220 3,220 3 TWD 4,000,000 ～TWD 5,999,999 0 4 TWD 6,000,000 ～TWD 7,999,999 0 5 TWD 8,000,000 ～TWD 9,999,999 0 6 TWD 10,000,000 and more 0

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(I) Those with non-audit fee paid to CPAs, their subjected and other affiliated firms accounts for more than one-fourth of the audit fee: Unit: TWD thousand Non-audit fee Name of the Audit period of Name of the CPA Audit fee System Company Human Notes accounting firm Others Subtotal CPA design registration resource Chia-Chien Tang 3,220 Ya-Lin Chen Jan. 1, 2019 KPMG ~ Transfer pricing Yeh, Wei-Dun 650 650 Dec. 31, 2019 Tax service KPMG Business Jan. 1, 2019 IT system Management Co., Yu, Ji-Long 300 300 ~ maintenance and Ltd. Dec. 31, 2019 technical support

(II) Whether there is any change of accounting firm and the audit fee paid in the replacement year is less than that paid in the preceding year: None. (III) Whether the ratio of audit fee for the preceding year decreases by 15% or more: None.

V. Information of changing accountants: None.

VI. Disclosure of any instance of the Company’s chairman, general manager, and finance or accounting manager having held a position in the CPA firm or its affiliates in the most recent year: None.

VII. Equity transfer and equity pledge changes of directors, managers and shareholders with shareholding exceeding 10% in the most recent year and up to the date when this annual report is printed

(I) Equity changes of directors, managers and major shareholders: Unit: shares

The current year as of Mar. 30, 2019 2020 Title (Note 1) Name Increase Increase Increase Increase Notes (decrease) in (decrease) in (decrease) in (decrease) in shares held shares pledged shares held shares pledged Chairman Chen, Chien-Hsin 0000 Director and major Chen, Ding-Chuan shareholder (4,500,000) 20,000,000 0 0 Director and Chen, Wei-Wang General Manager 0000 Director Chen, Ding-Chi (300,000) 0 (300,000) 0 Director Chen, Chien-Ming 150,000 0 150,000 0 Director Lee, Yung-Long 0000 Director Ken, Wen-Yuen 0000 Director and Deputy Tsai, Kuang-Feng General Manager 0000 Independent Wang, Hsiu-Chun director 0000 Independent Hung, Ying-Cheng director 0000 Independent Wu, Chung-Fern director 0000 Deputy General Retired on Oct. 31, Chou, De-Kang Manager 0000 2019 Deputy General Liao, Ming-Zhi Manager 0000 Deputy General Chen, Chong-

Manager Kuang 0000 Deputy General Lin, Zhao-Wen Manager 0000 Special Asst. to Du, Yi-Zhong Chairman 0000

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The current year as of Mar. 30, 2019 2020 Title (Note 1) Name Increase Increase Increase Increase Notes (decrease) in (decrease) in (decrease) in (decrease) in shares held shares pledged shares held shares pledged Deputy General Chen, Qing-Ta Manager 0000 Deputy General Chen, Ke-Lun Manager 0000 Deputy General Retired on Dec. 01, Zhang, Wei-Min Manager 0000 2019 Factory Director of Yeh,Shun-Xing the 2rd Plant 0000 Huang, Zheng- Associate Manager Lung 0000 Associate Manager Wu, Yao-Ming 0000 Associate Manager Jason Ju 0000 Associate Manager Tseng, Kun-Mu 0000 Associate Manager Chen, Xin-Zhi 0000 Associate Manager Liao, Nan-Ming 0000 Associate Manager Chen, Yi-Tang 3,000 0 0 0 Associate Manager Huang, Tsung-Wen 0000 Associate Manager Wu, Tian-Wang 0000 Factory Director of Kang, Yuan-Sheng the 3rd Plant 0000 Head of Operation Unit 1 of Color Hsiao, Chong-Kun 0000 Chemicals Head of Operation Unit 2 of Color Lee, Fu-Xing 0000 Chemicals Head of Technical Marketing Lai, Bao-Kun 0000 Division Head of Color New in office on Chemicals R & D Chen ,Wen-Zheng 0000 Jan. 1, 2020 Division Head of Specialty Chemicals Technics Huang, Yao-Xing 0000 Division Head of Pharmaceuticals Chen, Si-Feng Chemicals Q & C 0000 Division Head of Information Xue, Tzong-Yue Division 0000 Head of Resource Management Sung, Bai-Li 0000 Division Head of Retired on Sept. Environment, Health Huang, Zhi-Kuan 0000 28, 2019 and Safety Division Head of Product Responsibility Huang,Hui-Ching 0000 Division General Auditor of Tzeng, Mei-Rong Audit Office 0000 Head of Financial Division and Supervisor of Kuo-Pin Weng 0000 Accounting Department Note 1: Those with more than 10% shareholding of the Company shall be noted as a major shareholder, and shall be listed separately. Note 2: If the counter party of equity transfer or equity pledge is a related party, the following table shall be filled in.

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(II) Information of stock transfer Relationship with the Company’s directors, Reasons for supervisors and Share number Transfer Name Transfer date Counter parties transfer shareholders with (shares) price shareholdings of 10% and more Chen, Chien-Ming 150,000 Mar. 3, 2019 Father and son 15.95 Chen ,Huang-Ming 150,000 Chen, Ding-Chi Gifting Chen, Chien-Ming 150,000 Mar. 3, 2020 Father and son 14.75 Chen ,Huang-Ming 150,000

(III) Information of equity pledge: Not applicable.

VIII. Information of the shareholders with top 10 shareholding ratio and are related to each other or spouses or within the kinship of second-degree relatives Ex-dividend date: Jul. 11, 2018 Disclosure of information on related parties, spousal relationship or relations Shareholding held by the Shareholdings of spouse and Total shares held with within second degree of kinship, among person minor children other person’s name Rank Name (Note 1) the top ten shareholders, including their Notes names and relationships (Note 3) Shareholding Shareholding Share Shareholding Share number Share number Name Relationship ratio ratio number ratio Chen, Ding-Chi Brothers Wu, Lee-Ji Chen, Ding- Spouse 1 Chen, Chien-Hsin Chuan 73,000,000 13.33% 7,800,000 1.42% 0 0 Father and son Chen, Wei-Wang Father and son Chen, Ru-Aei Father and daughter Yung-De Investment Co., 30,000,000 5.48% 0 0 0 0 None None Ltd. 2 Chen, Ding-Chuan Father and daughter Representative, Wu, Lee-Ji Mother and daughter

Chen, Ru-Aei 5,966,000 1.09% 720,824 0.13% 0 0 Chen, Chien-Hsin Brother and sister Chen, Wei-Wang Brother and sister

3 Chen, Ding-Chi 14,375,254 2.62% 1,167,659 0.21% 0 0 Chen, Ding-Chuan Brothers

iShares Core 4 MSCI Emerging 8,355,781 1.53% 0 0 0 0 None None Markets ETF Chen, Ding-Chuan Spouse Chen, Chien-Hsin Mother and son 5 Wu, Lee-Ji 7,800,000 1.42% 73,000,000 13.33% 0 0 Chen, Wei-Wang Mother and son Chen, Ru-Aei Mother and daughter

6 Tsai, Gou-Liang 7,259,044 1.33% 0 0 0 0 None None Vanguard Emerging Markets Stock Index Fund, a 7 Series of 6,884,200 1.26% 0 0 0 0 None None Vanguard International Equity Index Funds Chen, Ding-Chuan Father and son Chen, Chien- Wu, Lee-Ji Mother and son 8 Hsin 6,730,000 1.23% 500,000 0.09% 0 0 Chen, Wei-Wang Brothers Chen, Ru-Aei Brother and sister Chen, Ding-Chuan Father and son Chen, Wei- Wu, Lee-Ji Mother and son 9 Wang 6,300,000 1.15% 494,350 0.09% 0 0 Chen, Chien-Hsin Brothers Chen, Ru-Aei Brother and sister Repr esent ative Chen, Ding-Chuan Father and daughter of Wu, Lee-Ji Mother and daughter Yung 10 Chen, Ru-Aei 5,966,000 1.09% 720,824 0.13% 0 0 Chen, Chien-Hsin Brother and sister -De Chen, Wei-Wang Brother and sister Inves tment Co., Ltd.

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Note 1: The top 10 shareholders shall all be listed. For those corporate shareholders, the name of the corporate shareholder and the name of the representative shall be listed separately. Note 2: The shareholding is calculated as the ratio of the shares held with the person, his or her spouse, minor children or others. Note 3: The relationship between the above-mentioned shareholders (including legal and natural persons) shall be disclosed in accordance with Regulations Governing the Preparation of Financial Reports by Issuers.

IX. Comprehensive Shareholding Ratio Shareholdings of the same investment business by the Company, the Company’s directors and managers, and businesses directly or indirectly controlled by the Company, and the comprehensive shareholding ratio:

Dec. 31, 2019 Unit: shares; % Investment by directors, managers Re-invested business The Company’s investment and directly- or indirectly-controlled Comprehensive investment (Note) businesses Share number Shareholding ratio Share number Shareholding ratio Share number Shareholding ratio Elite, Turkey 21,900 50% 0 0% 21,900 50% Everlight U.S.A. 300,000 100% 0 0% 300,000 100% Everlight (Hongkong) Ltd. 1,000,000 100% 0 0% 1,000,000 100% Everlight Europe B.V. (Netherlands) 500 100% 0 0% 500 100% Everlight (Singapore) Ltd. 24,300,000 100% 0 0% 24,300,000 100% Trend Tone Imaging, Inc. 44,906,400 76% 264,944 1% 45,171,344 77% DailyCare BioMedical Inc. 6,324,538 91% 0 0% 6,324,538 91% Evershine Investment Corp. 10,000,000 100% 0 0% 10,000,000 100% Good TV Broadcasting Corp 1,900,000 22% 0 0% 1,900,000 22% TAK Technology Co.,Ltd. 10,000,000 17% 3,000,000 5% 13,000,000 22% Note: The investment made with Equity Method by the Company.

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Capital Overview

I. Capital and Shares (I) Source of capital 1. Shares and types of share in the most recent year and up to the publication date of the annual report:

Unit: shares; TWD thousand

Authorized capital Paid-up capital Notes Issuing Month/Year Paid in price Share number Dollar amount Share number Dollar amount Source of capital properties other Others than cash Stock dividends from retained Aug., 2016 10 800,000,000 8,000,000,000 547,752,226 5,477,522,260 earnings None Note 1 26,083,440 shares Note 1:JIN-SHOU-SHANG-TZU No.10501200760 has been completed registration on Aug. 18, 2016.

Unit: shares Authorized capital Share type Notes Outstanding shares Unissued shares Total

Registered common shares 547,752,226 252,247,774 800,000,000 Shares of listed companies

2. Relevant information of summary reporting system: Not applicable.

(II) Composition of shareholders: Stop transfer day: Mar. 30, 2020 Shareholder Government Foreign institution structure Financial institution Other corporations Individual Total agency and individual Amount

Number of shareholders 0 7 120 46,991 111 47,229

Shareholding 0 582,131 44,952,010 455,281,533 46,936,552 547,752,226

Shareholding ratio 0.00% 0.11% 8.21% 83.12% 8.57% 100.00%

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(III) Distribution of shares 1. Common stock: Stop transfer day: Mar. 30, 2020 Shareholder ownership Number of shareholders Shareholding Shareholding ratio

1 ~ 999 24,978 2,900,329 0.53%

1,000 ~ 5,000 13,540 30,191,341 5.51%

5,001 ~ 10,000 3,697 27,180,150 4.96%

10,001 ~ 15,000 1,625 19,964,206 3.64%

15,001 ~ 20,000 769 13,769,039 2.51%

20,001 ~ 30,000 929 22,936,832 4.19%

30,001 ~ 50,000 664 26,055,800 4.75%

50,001 ~ 100,000 515 35,834,482 6.54%

100,001 ~ 200,000 275 37,795,993 6.90%

200,001 ~ 400,000 120 33,658,017 6.14%

400,001 ~ 600,000 38 18,395,775 3.36%

600,001 ~ 800,000 17 11,925,389 2.18%

800,001 ~ 1,000,000 10 8,897,112 1.62%

1,000,001 above 52 258,247,761 47.17%

Total 47,229 547,752,226 100.00%

2. Preferred stock: Not applicable.

(IV) List of major shareholders: shareholders with shareholding ratio above 5% Stop transfer day: Mar. 30, 2020 Shares Name of major Share amount Shareholding ratio shareholders

Chen, Ding-Chuan 73,000,000 13.33%

Yung-De Investment Co., Ltd. 30,000,000 5.48%

Note: Information of the shareholders with top 10 shareholding ratio, please refer to page 40.

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(V) Information of market price per share, net worth, earnings and dividends Unit: TWD Year The current year as of 2019 2018 Item Feb. 29, 2020 (Note 8) Highest 18.25 20.10 15.90 Market price per Lowest share(Note 1) 15.45 15.20 14.50 Average 16.44 17.68 15.30 Net worth per share Before distribution 14.28 13.87 － (Note 2) After distribution － 13.37 － Weighted average shares (thousand 547,752 547,752 － shares) Before retroactive EPS 0.66 0.73 － EPS adjustment (Note 3) After retroactive － － adjustment 0.73 Cash dividends 0.3 0.5 － Stock dividends from － － － retained earnings Dividends per Stock grants Stock dividends from share － － － capital reserve Accumulated undistributed dividend (Note － － － 4) P/E Ratio (Note 5) 25 24 － Analysis of return P/D Ratio (Note 6) － on investment 55 35 Cash dividend yield (Note 7) 0.02 0.03 － *If new shares of capital increase are issued by earnings or capital surplus, the market price adjusted retrospectively by the issued shares and cash dividends shall also be disclosed. Note 1: The highest and lowest market price of common shares in each year are listed, and the average market price each year is calculated according to the trading value and volume each year. Note 2: Please refer to the shares issued at the end of the year and fill in based on the distribution resolved by the shareholders’ meeting next year. Note 3: If there are any numbers not needed to be retrospectively adjusted due to conditions such as stock grants, the EPS before and after adjustment shall be listed. Note 4: If the issuing condition of equity securities contains the requirement that the undistributed dividends in the current year may be accumulated to the year with earnings, the accumulated undistributed dividends as of the current year shall be disclosed. Note 5: PE ratio = Average closing price per share of the current year / EPS. Note 6: PD ratio = Average closing price per share of the current year / cash dividends per share. Note 6: Cash dividend yield = cash dividends per share / average closing price per share of the current year. Note 8: Net worth per share and EPS shall be filled in with the data audited by the CPA in the most recent quarter and up to the date when the annual report was printed; the remaining columns shall be filled in with the data in the current year and up to the date when the annual report was printed.

(VI) Dividend policy and its implementation status The Company's dividend policy is in line with the needs of the Company's various business development investments and takes into account the interests of shareholders. In no other special circumstances, the distributed dividends are no less than 50% of the earnings after-tax after deducting legal reserve. The annual cash dividend is not less than 25% of the total dividends. The above dividend policy was passed by the resolution of 2017 Shareholders' Meeting. On March 19, 2020, the board of directors decided to distribute cash dividends of TWD 0.3 per share to shareholders.

(VII)The impact of the stock grants proposed by the shareholders’ meeting on the Company's operating performance and EPS: The Company has no share dividends distributed, and thus is not applicable here.

(VIII) Remuneration to employees and directors 1. The percentages or ranges of remuneration to employees and directors listed in the Articles of Incorporation:

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If the Company has profits in the current year, it shall appropriate 5% as employee remuneration and no more than 2% as director remuneration. However, when the Company still has accumulated losses, the amount for compensation should be retained in advance. The parties whose remuneration is paid with stocks or cash defined in the preceding paragraph include the employees of the subordinate companies that are reported to and passed by the Board of Directors. 2. If there is any difference between the estimated basis of remuneration to employees and directors, the calculation basis for the number of shares distributed to employees as remuneration, the actual distribution amount and the estimated numbers in the current period, please state the method of accounting treatment: (1) The estimated amount of the remuneration paid to employees and directors in the current period is based on the basis set out in the preceding paragraph, and the distributed amount has been passed by the resolution of the Board of Directors. (2) Not applicable. The remuneration to employees and directors are all distributed with cash this period. 3. The remuneration distribution passed by the Board of Directors: (1) Amount of remuneration to employees and directors distributed with cash or shares If there is any discrepancy with the estimated amount in the expense recognition year, the difference amount, reasons for the difference and the handling situation shall be disclosed: The remuneration amount paid to employees and directors proposed to be distributed in the current period is the same with the estimated amount in the recognition year. (2) The amount of employee remuneration paid by stocks and its proportion to the summation of net income after tax in individual financial reports and total amount of employee remuneration in the current period: Not applicable. 4. The actual distribution status of remuneration to employees and directors in the previous year (including number of shares, amount and stock price); if there is any discrepancy with the recognized remuneration to employees and directors, the difference amount, reasons for the difference and the handling situation shall be stated: The amount of employee remuneration in 2018 was TWD 26,554,340 and the amount of director remuneration was TWD 10,621,736, which are the same as the original estimated amount recognized as expenses. (IX) Conditions that the Company buys back its shares: None.

II. Issuance of corporate bonds: None.

III. Issuance of preferred stocks: None.

IV. Issuance of GDRs: None.

V. Issuance of employee stock warrants: None.

VI. Issuance of new restricted employee shares: None.

VII. Issuance of New Shares Upon any Merger and Acquisition With Other Companies: None.

VIII. Implementation of Capital Allocation Plans: None.

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Operational Highlights

I. Contents of Business (I) Scope of business 1. Main content of business: (1) C802200 Paints, Varnishes, Lacquers, Dyeing Mills and Dyestuff Manufacturing; (2) C802120 Industrial Catalyst Manufacturing; (3) C802990 Other Chemical Products Manufacturing; (4) C802041 Drugs and Medicines Manufacturing; (5) C802060 Animal Use Medicine Manufacturing; (6) C802100 Cosmetics Manufacturing; (3) C801990 Other Chemical Materials Manufacturing; (8) CA04010 Metal Surface Treating; (9) C801010 Basic Industrial Chemical Manufacturing; (10) F401010 International Trade; (11) C199990 Other Food Manufacturing Not Elsewhere Classified; (12) C802110 Cosmetics Ingredients Manufacturing; (13) F108051 Wholesale of Cosmetics Ingredients; (14) ZZ99999 All business items that are not prohibited or restricted by law, except those that are subject to special approval;

2. Business percentages in 2019: Sales amount Business and product type Sales volume Percentage (TWD thousand) Color chemicals 20,939 tons 4,602,177 49.3%

Specialty chemicals 3,624 tons 2,055,000 22.0%

Toner 7,264 tons 1,515,822 16.2%

Photoresist 375 tons 350,487 Electronic 10.4% chemicals Others 9,330 tons 614,748

Prostaglandin 17,644 g 172,693 Pharmaceu 2.0% ticals Other material 627 kg 16,593 medicines Others 644 units 4,556 0.1%

Total 9,332,076 100.0%

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3. Current product items and new products planned to be developed: New products planned to be Product type Current products developed  Textile dye  Increasing items of each type of  Leather dye existing products  High-purity dye used in ink jet printing  High-purity dye used in digital textile Color printing chemicals  Ink of digital textile printing  Anodized aluminum dye  Paper dye  Functional chemicals used in textile  Solar energy dye  UV-absorber  Increasing items of each type of  Hindered amine light stabilizer existing products Specialty  Formulated product chemicals  Functional Masterbatches  Antioxidants  High-molecular polymerizable dye  Colored toner  Increasing items of existing  Black toner products  Toner finished cartridges  Enhancing the applicable range of Toner  Carrier and developer existing products  Ceramic toner  Add applications in new fields

Use in IC, LCD, LED and TP industry  Increasing items of each type of  Photoresist existing products  Developer  IC package amplified Photoresist Electronic  Slurry  Photoresist with low-temperature chemicals  Wet chemicals embedded covering  Functional ink of thermosetting and UV  Photosensitive polyimide curing  Electronic functional chemicals  Material medicine for Prostaglandin  Increasing the items of material Pharmaceutic  Other material medicines medicine for Prostaglandin als  Materials medicines for the elderly uses and other purposes

(II) Industry overview 1. The current condition and development of the industry Chemicals can be broadly classified into three categories: bulk chemicals, fine chemicals and specialty chemicals. Specialty chemicals are mainly used in processes or final products for the purpose of improving product characteristics, and are mostly high value-added products. The products of Everlight Chemical are all specialty chemicals. The demand for global specialty chemicals is growing steadily. High value is the development direction of Taiwan's chemical industry. The so-called high value development includes the development of existing chemical products in the direction of high value, the development of high-priced or high value-added products, or the development of advanced materials, etc. The key to high value development is to master the core technology, key materials and intellectual property rights, as well as the ability to continuously innovate. 2. Relevance between the up, middle and downstream of industry The direct upstream of the specialty chemicals industry is basic chemical raw material and organic chemical intermediate, and the next upstream is petrochemical, coal char chemical and natural gas chemistry. The specialty chemicals industry is the most technical and innovative field in the chemical industry, and is also a key industry directly supporting the manufacturing of electronics, optoelectronics, pharmaceuticals, and textile, etc., in the chemical industry. The development of specialty chemicals industry not only requires the strengthening of the upstream chemical industry supply chain and the effective grasping the source of key raw materials, but also needs the crossing of the gap between downstream and other industries and the development of application technology, in order to establish a bridge of technical communication with customers.

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Downstream Up and middle-stream chemical manufacturing industry industry

Textile/leather industry Petrochemicals Basic chemical raw Coal char chemicals Plastic/paints industry materials Specialty chemicals Natural gas Optoelectronics/ Organic chemical chemistry semiconductor industry intermediates Health care industry

3. Product development trends and competition situations All the products of the Company belong to the "specialty chemicals" with the characteristics of small amount, various type and high value-added, which are generally in a fully-competitive market with many manufacturers. The followings are the development trends of the products in the top four business divisions with the highest operating revenue: In the Color Chemical business, dye Industry has a stable development towards the trends of environmental protection, energy saving, emission reduction, appeal of green dyeing and finishing. More stringent environmental protection policies and supply and demand of raw materials are still the main factors affecting price fluctuations in the dye market. Reactive dye development continues to provide overall solutions for special fastness and differentiated commodity demand. For example, launching Everzol ERC, a highly effective, eco-friendly and energy saving cleaning process, PCA free dyes and enhancers related to textile fastness, cotton knitted fabric in the cold pressure dyeing application process, etc. In the dyeing of nylon fabrics, we continue to develop high-fastness bright color series acidic dye products, such as Everacid PA, S, X-Type. The development of digital textile printing technology has matured and stabilized. the main technology threshold is still in the hands of mechanical equipment merchants and ink suppliers, and the overall market demand is moving in a positive direction. Currently, for the PUR business, we have adhesives catering for industrial textile for high temperature lamination with high bonding strength, and for fabric membrane for low temperature lamination with moderate bonding strength, making our product variety more exhaustive. In the Specialty Chemical industry, the main development direction of polymer additives is the formulation technology to increase the weather resistance, yellowing resistance, easy processing and recyclability of polymer materials. The most potential growth applications include automotive component related industries, green energy, photovoltaic industry, composite materials, and beauty care products, etc. In the toner business, with the popularity of color machines, color toner will become the mainstream of the market. Capital investment, technological innovation and upstream and downstream integration are the key to beating competitors. Black toner continues to maintain product competitiveness on the market by production management, simplified process and tightly-control costs. Due to breakthroughs on the product application technique, ceramic toners have been commoditized and sold in small quantity. In the Electronic Chemicals business, 5G bringing the rise of industrial transformation drives the development of AI and IOT integrated with wearable mobile devices, automotive, power semiconductors and sensors, smart homes and other applications; therefore, the demand for MEMS process materials will continue to increase. With the high-end intelligent mobile phone display focusing on AMOLED paired with LTPS and embedded touch sensor (In-cell, On-cell), the demand for the low temperature process and LTPS process material is driven and support for the opportunities of commercialization of new displays.

(III) Overview of technology and R&D The R&D expenses devoted and successfully developed technology or products in 2019 and up to the publication date of the annual report: Amount: TWD thousand Year 2019 The current year until Feb. 29, 2020 Item R&D expense devoted 434,190 66,373 R&D results: Patents granted 5 0 Patent Accumulated patents 174 174 New products developed 73 11

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(IV) Development programs for long- and short-term business 1.Long-term development program: Everlight Chemical's 2020 Green Gold Vision is to "become a global happy company that will continue to innovate and provide green chemical solutions", and focus on four major aspects: sustainable environmental protection, innovative value, integrity and happiness, and global partners for development. We strive to provide a better life for human beings and implement the brand promise of “Better Chemistry Better Life”. 2.Short-term development program: (1) Plans on overseas production base. (2) Certification of information security management system. (3) Business legal compliance and management system.

II. Market and Production Profile (I) Market analysis 1. Sales areas of major products: Unit: TWD thousand 2019 2018 Sales areas Dollar amount Percentage (%) Dollar amount Percentage (%) Asia 5,107,268 55 5,056,871 52 Taiwan 1,494,626 16 1,709,483 18 Europe 1,576,784 17 1,526,343 16 Americas 984,045 10 1,076,558 11 Other areas 169,353 2 251,764 3 Total 9,332,076 100 9,621,019 100

2. Market share and supply and demand and growth of the market in the future: Color Chemicals: In 2018, the total global dye market grew slightly to 1.66 million tons, and the Company's market share was about 1.3%. On the global dye market in the past decade, the dye capacity of Mainland China and India in the same industry has expanded rapidly and the supply is sufficient. Overall, the market situation is oversupply. However, the supply side of the dye and intermediate industry in the Mainland China has been tightening due to strengthening of chemical safety enforcement brought about by safety accidents, and high environmental compliance requirements. In the long run, there is an opportunity for supply and demand to reach a balance gradually. In the future, dye products will be researched and developed in the direction of high exhaustion, high fixation, water-saving and toxic-free due to the awareness of environmental protection. Specialty Chemicals: In 2019, the global market for UV absorbers and light stabilizers totaled approximately TWD 55 billion, and the market share of Everlight Chemical was approximately 4%. The global compound annual growth rate is estimated to be 6%~7% in the next five years. The main growth momentum comes from the demand for various types of plastics, including packaging materials, automotive plastics and agricultural films. The second largest growth momentum comes from the coatings industry, such as industrial coatings and construction coatings. Due to the high technical threshold, additive manufacturers are concentrated in a few developed industrial countries. Emerging markets and new application areas have become the most important growth opportunities. Toner business: In 2019, the global AM (After Market), the demand for toner remained flat. The total market volume remained at 67,000 tons, and the Company's market share was about 11%. In the past two (2) years, with the popularity of color machines, the demand for color toner has gradually increased. Due to the withdrawal of individual manufacturers, the supply of low-level black toner has decreased. However, as the Chinese manufacturers continue to expand the capacity of their facility, the black toner is in oversupply. The launching of black toner products that can protect our market share is advantageous in strengthening our customer base. Expanding the European and US

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markets, and developing color toner, small packaging products will become the main opportunities for growth in the future. Electronic Chemicals: In 2019, the global photoresist and process chemicals market size was about NTD 150 billion. There will be about 5~6% annual growth rate over the next 3 years The Company's market share has not reached 1%. In the future, electronic consumer products will develop towards the mobile device with a rapid response speed, so FOWLP, FOPLP packaging technology will become the mainstream of the latter segment packaging, and then drive the demand for thick film light resistance and chemical amplified photoresist to grow. On the other hand, the flexible low temperature process material will be the focus of the new display critical part manufacturers. 3. Niche for competition: (1) Through the promotion of corporate brand and brand management, the Company’s market competitiveness will be strengthened. (2) Continuing to accumulate autonomous key technologies, and continuously developing new products to meet the needs of customers. (3) The global logistic, marketing channel and technical service network have been established to provide fast and immediate service and increase customer satisfaction, in order to build long-term and stable partnerships. (4) Technological innovation, competitiveness enhancement and profitability: ➀ Differentiating products and technologies to increase the market share of products. ➁ Promoting niche and superior products to increase added value. 4. Favorable and unfavorable factors of development vision and responding measures: (1) Favorable factors: ➀ Regional and national chemical-related regulations have been promulgated. Governments such as China have greatly improved the implementation of environmental protection regulations, resulting in higher environmental protection costs, rising entry thresholds and operating costs of the chemical industry. The survival space of low-cost competitors in developing countries will be compressed. ➁ Governments around the globe pay attention to the development of high-tech chemical materials that are environmentally sustainable. ➂ The growth momentum of polymer materials driven by the application of innovation industries: for example, materials needed for smart cars, green electricity and other industries. ➃The price of color machines has decreased, and the color toner market has become more popular. (2) Unfavorable factors: ➀The global economy slows down. Protectionism is on the rise and market uncertainty increases. ➁ The tightening of Chinese environmental protection policies, imposing limitation on chemical industrial park, and forcing factory relocation and close-down, give rise to uncertainty in raw material supply and price increase. The management of supply chain is made more difficult and the control of costs become harder as well. ➂Taiwan's major trade competition countries have actively negotiated regional and bilateral free- trade agreements, which has certain degree of influence on Taiwan's export competitiveness. ➃Large-scale international chemical counterparts continue to conduct M&As, and the Chinese counterparts are actively expanding capacity to occupy market share with low prices. ○5 The exchange rate has large variations, which causes the exchange gains and losses to fluctuate greatly. (3) Response measures: ➀ Developing towards "high-tech knowledge industry" and "green economy industry," we will promote high-tech chemicals of environmental green energy with the core of R&D advantage, technology application and manufacturing capabilities. ➁ We will grasp the opportunity of global supply chain transfer due to China-US trade war and regionally politically conflicts, progressively developing the potential market.

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➂ Accelerating the expansion of service energy, extending to the upstream and downstream of the value chain, and becoming a multi-dimensional chemical company with equal emphasis on production and service. ➃ Integrating the R&D, sales and production resources of the cross-strait toner business.

(II) Important uses of main products and their production process: 1. Important uses of main products: Product Product name Purposes type Textile dye For cotton, hemp, rayon, wool, silk and nylon Leather dye For leather and fur High-purity dye used in For office supplies, advertisement printing, labeling, and packaging ink jet printing materials High-purity dye used in digital textile printing Color For textile printing, leather printing, wallpaper, and outdoor advertising Digital textile printing chemicals Printing ink Anodized aluminum dye For aluminum metal, 3C housing, bicycle, and screw Paper dye Used in the paper industry Functional chemicals Used in the textile/leather industry used in textile Solar energy dye For solar sensitized dye batteries UV-absorber Hindered amine light stabilizer For coatings, adhesives, plastics, polyurethanes, elastomers and Functional Specialty cosmetics Masterbatches chemicals Antioxidants Formulated product High-molecular For polyurethane foams, adhesives and elastomers polymerizable dye Colored toner For color laser printers, color printers and multifunction printers For black and white laser printers, black and white printers and Black toner multifunction printers Toner Toner finished cartridges For color / black and white printers and multifunction printers Carrier and developer Ceramic toners Used for coloring ceramic ware Used in yellow lithography process such as IC, LCD, LED, TP and IC Photoresist assembly Developer For rinsing imaging process Slurry For substrate flattening process Used in semiconductor and substrate surface cleaning, and process such Electronic Wet chemicals as electroplating chemicals Functional ink of thermosetting and UV Used in surface coating for substrates such as metals and glass curing Electronic functional Functional chemicals for the electronic assembly industry chemicals Material medicine for Treatment of gastric ulcer, glaucoma, induction of labor, treatment of Pharmaceut Prostaglandin sexual dysfunction, and animal reproductive management, etc. icals Treatment of hypertension, Parkinson's disease, allergic conjunctivitis, Other material medicines cancer, and central nervous system, etc.

2. Production process: The production process of the Group's main products can be roughly divided into the following three categories: (1) Production process based on chemical reaction: Semi-finished Finished Material → Intermediate → → product product

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Step 1: the basic raw material is formed into an intermediate through one or more chemical reactions. Step 2: the intermediate is then converted into a semi-finished product by chemical changes. Step 3: the semi-finished product is made into a product through different processes, such as refining, purification, drying, crushing, and batching, etc. Products that fall into this type of production process include: various type of dyes, light stabilizers, yellowing resistance agents, and pharmaceuticals, etc.

(2) Production process based on formula mixing: Main Formula Finished good → → Filtering → ingredients mixing replenishing Step 1: precisely putting in the required raw materials. Step 2: mixing and performing a process inspection. Step 3: conducting precision filtering through the various stages and performing a process inspection. Step 4: the finished product is replenished and packaged, and then inspected. Products that fall into this type of production process include: electronic chemicals, inkjet ink dyes, and nanomaterials, etc.

(3) Production process of toner: Main Formula → → Extrusion → Milling → ingredients mixing

Finished good Mixing → - replenish

Step 1: precisely putting in the required raw materials. Step 2: mixing the raw materials with a mixer. Step 3: the mixing of raw material is carried out by the extruder, so that the raw materials are uniformly dispersed, and then a process inspection is performed. Step 4: grinding toner to the required particle size and a process inspection is performed. Step 5: mixing toner and external additives into the mixer, and performing a process inspection. Step 6: the finished product is replenished and packaged, and then inspected. Products that fall into this type of production process include: colored toner, black toner, and ceramic toners, etc.

(III) Supply of main raw materials The main raw materials of various specialty chemicals of the Company are organic chemical intermediates (benzene and naphthalene series, etc.) and basic chemicals (acid, alkali, salt, and solvent, etc.). Mainland China, India and Taiwan are the main sources of the materials. The supply capacity and prices of raw materials are mainly affected by the following factors: due to the tightening of environmental protection and inspection of industrial security in the Mainland China and India, and occurrence of safety accidents, the production capacity of manufacturers is limited, while production cost and supply risks have increased. The smog problem in the Mainland, the compulsory use of low-sulphur fuel lead to an increase in transportation costs. The main raw materials of toner are polymer materials such as acrylic and polyester resins, magnetic iron oxide and carbon black, etc. Japan, Europe and the United States are the main sources of supply. Price of resins rises due to an increase in the related raw material prices. As the labor, energy and other production costs of the European, American and Japanese suppliers continue to climb year after year, we have sought supply from China resin manufacturers as countermeasure. The magnetic iron oxide supply which was monopolized previously, saw the entering of Chinese and Indian suppliers. In the future, it is expected to be in oversupply in the future, and thus the price is expected to fall gradually.

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(IV) The name of the customer who has once accounted for more than 10% of the total purchase (sales) of goods in any of the year within the most recent two (2) years, the amount and proportion of the purchase (sales), and the reasons for the increase or decrease: there were no such matters in the most recent two (2) years.

(V) Production volume and value in the most recent two (2) years Unit: TWD thousand Year 2019 2018 Production volume and value Production Production Production Production Production value Production value Business and capacity amount capacity amount product type Color chemicals 34,900tons 20,407tons 3,374,519 37,000tons 21,219tons 3,412,478 Specialty chemicals 5,000tons 3,963tons 1,671,756 5,000tons 4,020tons 1,646,208 Toner 11,000tons 7,264tons 1,281,070 11,600tons 7,880tons 1,416,770 Electronic Photoresist 757tons 386tons 277,056 757tons 369tons 260,194 chemicals Others 18,000tons 9,116tons 533,902 18,000tons 13,033tons 663,728 Prostaglandin 48,000g 9,801g 104,191 48,000g 31,814g 182,488 Pharmac Other aterial euticals 3,000kg 516kg 10,893 3,000kg 284kg 6,958 medicines Total 7,253,387 7,588,824 Note 1: Capacity refers to the quantity that can be produced using existing production equipment under normal operation after the Company has evaluated factors such as necessary stoppages and holidays, etc. Note 2: The production value is calculated at cost.

(VI) Sales volume and value in the most recent two (2) years Unit: TWD thousand

Year 2019 2018

Domestic sales Abroad sales Domestic sales Abroad sales Sales volume and value Volume Value Volume Value Volume Value Volume Value Business and product type Color chemicals 2,698 tons 472,005 18,241 tons 4,130,172 3,075 tons 564,268 17,438 tons 3,959,543 Specialty chemicals 478 tons 254,807 3,146 tons 1,800,193 465 tons 247,396 3,799 tons 1,913,458 Toner 106 tons 40,716 7,158 tons 1,475,106 120 tons 41,667 7,847 tons 1,586,053 Electronic Photoresist 274 tons 167,189 101 tons 183,298 260 tons 153,559 98 tons 169,673 chemicals Others 7,911 tons 548,051 1,419 tons 66,697 11,542 tons 693,445 1,597 tons 62,464 Prostaglandin 82 g 1,889 17,503 g 170,804 38 g 451 22,210 g 212,692 Pharmaceu Other ticals material 82 kg 5,414 545 kg 11,179 74 kg 4,003 166 kg 7,467 medicines Others 277 units 3,637 367 units 919 1,939 units 3,660 486 units 1,220 Total 1,493,708 7,838,368 1,708,449 7,912,570 Note: In 2019, the Company's consolidated domestic and foreign sales ratio was 16%: 84%.

III. Information of the employees of the Company and affiliates The current year as of Year 2019 2018 Feb. 29, 2020 Employee number Company 295 298 296 Factory 1633 1671 1610 Total 1928 1969 1906 Average age 39.6 38.8 39.7 Average service years 10.8 9.9 10.9 education (%) distribution of

Percentages PhD 2 2 2 Master 23 22 23 College 55 55 54 Below (and include) 20 21 21 high school

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IV. Information of Environmental Protection Expenditure (I) In the most recent year, up to the publication date of the annual report, losses incurred due to pollution: 1. losses incurred due to pollution (including damages): none. 2. violation of environmental protection law: On May 30 2019, during inspection, Department of Environmental Protection, Taoyuan noted before the application for change in M07 production process was approved for trial run, it went ahead and violated Article 24 Section 2 of Air Pollution Control Act; on August 30, a fine of NTD100,000 was given (EPA Air No. 1080216653) The approval for a trial run was subsequently obtained on July 25. On March 13, 2020, an operating permit was given. (II) Estimated amount of current and future possible losses and countermeasures In March 2016, 3rd Plant conducted soil and groundwater pollution control and inspection. In April 2019, remediation proposal was submitted. It passed review in December. On January 16, 2020, it received ratification from Taoyuan City Government and started the remediation as per the proposal. It is estimated to spend NTD50 million for the remediation. The project is estimated to be completed in June 2025.

V. Labor Relations (I) Employee welfare measures, on-the-job further study, training, retirement system, working environment of the Company and personal safety protection of employees and its implementation, as well as the agreement between labor and employer and the maintenance measures of various employees' rights and interests 1. Welfare measures The Company focuses on the care of employees, and provides employees with complete salary, reward, bonus and welfare system, so that employees can contribute their efforts in the workplace. Meanwhile, in order to honor the long-term contribution of senior staff and excellent employees to the Company, they will be given commemorative gold coins and awarded trophies respectively. General health checkups for employees and physical examinations for senior staff will be conducted regularly every year. Relevant welfare measures include the followings: (1) Rewards: year-end bonus / holiday gift / Labor Day bonus / birthday gift (2) Subsidies: wedding gift / maternity allowance / child education award and subsidy / travel subsidy / injury relief payment / death subsidy (3) Insurance: labor insurance / health insurance / employee group insurance / voluntary group insurance / business travel insurance (4) Systems: factory uniform / food stipend / performance bonus / proposal bonus / club activity (5) Equipment: nursing room / staff dorms / staff transportation vehicle / staff restaurant / gym / basketball court / library / special store (6) System of day-offs (vacations): pre-borrowed annual leave / paternity leave / family care leave / menstrual leave / nursing leave 2. Educational training The Company promotes employee character education in the long run. Based on character education, in management, the supervisors embrace the service spirit of "servant," educate the staff full-heartedly and practice what they preach, in order to deepen the integration and cooperation of employees into the Company's business philosophy and corporate culture. Based on job functional structure, Everlight Chemical conducts talent selection, talents education, talents exertion and performance management. According to the annual training plan, the Company compares the structure with the education and training system (including inspiration training, orientation education, class training, professional training, and project training). The Company provides education and training for employees, in the hope of balancing the sustainable development of talents in the fields of production, R&D, marketing, and management. In addition, employees may be designated by the Company to study domestically or abroad (including retrieving master’s degree or PhD degree or professional technical study) if necessary for their work or tasks.

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3. Retirement system The Company established the "Labor Pension Reserve Supervision Committee" in accordance with the Labor Standards Act, which monthly appropriates pension reserve into the account in Taiwan Bank; employees who meet retirement criteria may be distributed with pension fund, of which the pension base is calculated according to the service years. The Company will reimburse the pension fund by 6% in accordance with laws and remit it into the personal account of an employee who satisfies the new system of retirement. In addition, the Company has also formulated the “Application Rules for Early Retirement of Employees”. Any qualified employees can be retired early if approved by the Company. 4. Working environment and employee personal safety protection and its implementation The Company manages the corporation with the truth-love inspired by the Bible, shapes the working environment in which employees can exert their abilities, and motivates employees to achieve the mutual goals. Adhering to the core values of decent management and love management, the Company holds gratitude worships every year to let employees feel a warm and grateful culture. The Company's introduction of the project, "Character First," has entered 22 years, which enables employees to cultivate good character in their work, in families and in lives and to regard character as the goal of lifelong learning. The Company incorporates related regulations of Act of Gender Equality in Employment into the Work Rules and have reported to Taipei City Government for examination. The Company adheres to the safety and health policy of “Respect for Life, and Pursue Zero Disasters,” and implements the Vocational Safety and Hygiene Management System (OHSAS 18001) to ensure employee safety and company assets through the management spirit of Plan-Do-Check-Action (PDCA) cycle. Every factory of Everlight Chemical has obtained the certification of OHSAS 18001. In order to provide a safe workplace, the Company has set vocational safety regulations and training methods, implements employee health checks every year, and regularly organizes emergency response drills and promotes zero-disaster activities, in order to prevent accidents and minimize occupational injuries. In addition to holding safety and health committee meetings every quarter, each factory also holds safety and health propagations on mothly factory meetings to explain safety and health issues such as regulatory updates, common missing items, propaganda items and promotion plans, etc. (1) Zero-disaster exercise Introducing the concept of zero disasters. Every day before the start of construction, the job site supervisor will lead the colleagues to carry out health confirmation, response measures, identification calls, which increase the alertness of employees during their work and reduce mistakes in the work. (2) Emergency response Every year, self-defense firefighting training and drills and poisoning disaster drills are regularly held in accordance with laws and regulations. The Company also continuous to improve and hold irregular trainings to ensure that the Company can minimize disaster losses in any emergency. (3) Monitoring of operation environment The Company improves the working environment based on the characteristics of the job site, in order to provide a safe and comfortable working environment. To prevent occupational hazards and protect employees' health, the Company teaches and requires workers to use personal protective equipment to reduce the exposed harm to an acceptable level. The Company entrusts qualified institutions to carry out regular operation environment monitoring in accordance with the “Measures for Implementing Labor Operation Environmental Monitoring”. The monitoring contents are all in accordance with statutory requirements (about chemical and physical factors). The unit may also propose an assessment for operations with concern of hazards. If there is any abnormality in the monitoring results, corrections and improvements will be made to ensure the safety of employees.

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(4) External training In accordance with the "Occupational Safety and Health Education and Training Rules", the personnel for special operations of the Company have completed safety and health education and training for special operations, and obtained operational qualification certificates/licenses. The Company actively dispatches staff to participate in business supervisor trainings related to occupational safety and health, and cultivates seed personnel to obtain relevant qualifications. The Company also actively participates in the Industrial Zone Safety and Health Promotion Association, letting the staff learn from the safety management experiences of other factories. For the management of the contractor, all contracting and outsourced personnel who enter the Company's factory area must abide by the relevant safety and health regulations of the Company, in order to ensure the safety of the construction personnel. Under the continuous deepening of various business concepts, the Company's corporate value has been significantly improved, which has also been positively recognized by all the staff and customers. 5. Negotiation between labor and employer and the status of each measure for maintaining employee rights: Business trade unions have been established and will hold labor-management consultation meetings quarterly according to regulations, coordinating the management-union relation, promoting cooperation between management and labor, and improving work efficiency. (II) In the most recent year and up to the publication date of the annual report, losses due to labor-employer disputes (including violation of Labor Standard Act found in labor inspection, should have details of date of penalty, serial number of penalty, article of statute violated, content of article of statute violated and content of wrongdoings documented), estimated amount of current and future possible losses and response measures: None.

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VI. Important Contracts The contracts that are still valid and will expire in the most recent year as of the date of publication of the annual report are as follows: Contract Begin and End Litigant Main content Restrictive covenant characteristics Date of contract Engineering Yong Shen Company October 2018 – Dust collector engineering None contract Limited May 2019 Shihlin Electric & Engineering March 2019 – Smart power management Engineering Corp. None contract June 2019 system Hsinchu Branch Engineering Shun De Construction May 2019 – June Renewal of ice making None contract Co., Ltd. 2019 machine Engineering January 2019 – Feng Ying Co., Ltd. Glass reactors None contract September 2019 Merchandising August 2019 – Procurement for Weblande Corporation None contract November 2019 laboratory equipment Engineering Shun De Construction November 2019 Replacement of vaporizer None contract Co., Ltd. – February 2020 1. This case and the case of 2011 syndicated loan can coexist at the same time, but the total amount of money used shall not exceed the credit line of this case. 2. The first use of the loan within three (3) months after the Borrowing 7 banks such as CTBC March 2015 - Syndicated credit contract signing date. contract Bank March 2020 3.The first term starts from the 2nd year after the borrowing date. Afterwards, 1 term lasts for 6 months, and the loan is amortized in 7 terms in total. The amortization ratio is 10%, 10%, 10%, 15%, 15%, 20%, and 20%, respectively. Engineering September 2019 Installation of piping in Bai Cheng Company None contract – May 2020 glass reactor Engineering Today Water Equipment February 2020 – Submersible mixers None contract Company August 2020 The first phase of the Engineering Shou Jing Construction October 2018 – rehabilitation engineering None contract Co., Ltd. August 2020 for biology of first order Engineering Ming Shun Mechanical July 2019 – 1st biology wind pipe None contract Engineering Co., Ltd December 2020 renovation Construction of wiring Engineering Yi Cheng Corporation July 2019 – board of biological None contract Co., Ltd December 2020 treatment system Procurement Hua Ya Automobile Co., April 2016 – April Procurement of steam None contracts Ltd 2026

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Financial Information, Financial

Performance, And Risk Management

I. Condensed Balance Sheet and Comprehensive Income Statement Data in the Most Recent five (5) Years (I) Condensed Balance Sheet and Comprehensive Income Statement Data Condensed Balance Sheet - Consolidated Unit: TWD thousand

Year Financial data in the most recent 5 years (Note 1)

Item 2019 2018 2017 2016 2015 Current assets 6,302,008 6,577,789 6,301,647 6,323,846 6,115,332 Property, plant and equipment 5,527,737 5,754,565 5,789,476 5,685,055 5,522,018 (Note 2) Intangible assets 122,455 131,270 119,020 32,592 － Other assets (Note 2) 1,671,162 1,394,402 1,514,475 1,562,477 1,721,852 Total assets 13,623,362 13,858,026 13,724,618 13,603,970 13,359,202 Current Before distribution 3,982,351 4,070,946 3,414,980 4,173,084 4,326,481 liabilities After distribution － 4,344,822 3,688,856 4,446,960 4,587,315 Non-Current liabilities 1,502,292 1,873,884 2,272,860 1,450,751 1,058,757 Before distribution 5,484,643 5,944,830 5,687,840 5,623,835 5,385,238 Total liabilities After distribution － 6,218,706 5,961,716 5,897,711 5,646,072 Equity attributable to owners of the 7,823,140 7,599,139 7,724,086 7,658,408 7,649,681 parent company Capital stock 5,477,522 5,477,522 5,477,522 5,477,522 5,216,688 Capital surplus 474,558 473,558 473,558 473,558 473,558 Retained Before distribution 1,901,498 1,797,826 1,673,952 1,571,900 1,683,039 earnings After distribution － 1,523,950 1,400,076 1,298,024 1,161,371 Other equity (30,438) (149,767) 99,054 135,428 276,396 Treasury stock － － － － － Non-controlling interests 315,579 314,057 312,692 321,727 324,283 Before distribution 8,138,719 7,913,196 8,036,778 7,980,135 7,973,964 Total equity After distribution － 7,639,320 7,762,902 7,706,259 7,713,130 * If the Company has prepared individual financial statements, it shall also prepare the individual condensed balance sheets and comprehensive income statements for the most recent five (5) years separately. * If the financial information prepared based on IFRSs refers to that for less than the most recent five (5) years, the Company shall also prepare the financial information based on the R.O.C. Financial Accounting Standards as shown in the following Table (2): Not applicable.

Note 1: The years of which data has not been audited by the CPA shall be noted. Note 2: Those who have applied for asset revaluation in the current year shall list the date of processing and the value of revaluation. Note 3: As of the date when the annual report is printed, companies that have been listed or whose stocks have been traded in the securities firm's business locations shall be disclosed together if they have the latest financial data audited by the CPA. Note 4: For the above figures referred to as the number after distribution, please fill in according to the resolution of the shareholders’ meeting of the next year. Note 5: Financial data shall be listed with the corrected or restated numbers and be noted with the circumstances and reasons once the Company has been notified by the competent authority to make corrections or restatements by itself.

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Condensed Balance Sheet - Individual Unit: TWD thousand Year Financial data in the most recent 5 years

Item 2019 2018 2017 2016 2015 Current assets 4,389,443 4,678,231 4,419,149 4,236,078 4,074,675 Property, plant and equipment 4,407,578 4,532,783 4,469,701 4,311,865 4,097,415 Intangible assets 113,779 120,734 116,119 30,882 － Other assets 3,046,677 3,051,516 3,274,997 3,278,061 3,568,322 Total assets 11,957,477 12,383,264 12,279,966 11,856,886 11,740,412 Current Before distribution 2,922,645 3,004,070 2,422,266 2,942,901 3,067,336 liabilities After distribution － 3,277,946 2,696,142 3,216,777 3,328,170 Non-Current liabilities 1,211,692 1,780,055 2,133,614 1,255,577 1,023,395 Total Before distribution 4,134,337 4,784,125 4,555,880 4,198,478 4,090,731 liabilities After distribution － 5,058,001 4,829,756 4,472,354 4,351,565 Equity attributable to owners of the － － － － － parent company Capital stock 5,477,522 5,477,522 5,477,522 5,477,522 5,216,688 Capital surplus 474,558 473,558 473,558 473,558 473,558 Retained Before distribution 1,901,498 1,797,826 1,673,952 1,571,900 1,683,039 earnings After distribution － 1,523,950 1,400,076 1,298,024 1,161,371 Other equity (30,438) (149,767) 99,054 135,428 276,396 Treasury stock － － － － － Non-controlling interests － － － － － Before distribution 7,823,140 7,599,139 7,724,086 7,658,408 7,649,681 Total equity After distribution － 7,325,263 7,450,210 7,384,532 7,388,847

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Condensed Comprehensive Income Statement - Consolidated Unit: TWD thousand Year Financial data in the most recent 5 years (Note 1)

Item 2019 2018 2017 2016 2015 Operating revenue 9,332,076 9,621,019 9,169,480 9,450,874 9,537,421 Operating gross profit 2,037,340 2,165,218 1,970,272 2,098,902 2,284,514 Operating income 403,633 507,464 362,419 467,439 672,554 Non-operating revenue and expense 52,437 12,080 109,973 105,295 52,462 Net income before tax 456,070 519,544 472,392 572,734 725,016 Net income of going-concern 349,237 407,920 370,244 473,834 573,662 operation unit Loss from discontinued unit － － － － － Net income (loss) 349,237 407,920 370,244 473,834 573,662 Other comprehensive income 132,755 (263,835) (29,590) (202,659) (81,995) (Net amount after tax) Total comprehensive income 481,992 144,085 340,654 271,175 491,667 Net income attributable to owners of 362,447 401,983 366,138 468,534 565,347 the parent company Net income attributable to non- (13,210) 5,937 4,106 5,300 8,315 controlling interests Comprehensive income attributable 496,877 138,502 344,353 269,561 480,345 to owners of the parent company Comprehensive income attributable (14,885) 5,583 (3,699) 1,614 11,322 to non-controlling interests EPS 0.66 0.73 0.67 0.86 1.03 * If the Company has prepared individual financial statements, it shall also prepare the individual condensed balance sheets and comprehensive income statements for the most recent five (5) years separately. * If the financial information prepared based on IFRSs refers to that for less than the most recent five (5) years, the Company shall also prepare the financial information based on the R.O.C. Financial Accounting Standards as shown in the following Table (2): Not applicable. Note 1: The years of which data has not been audited by the CPA shall be noted. Note 2: As of the date when the annual report is printed, companies that have been listed or whose stocks have been traded in the securities firm's business locations shall be disclosed together if they have the latest financial reports audited by the CPA. Note 3: Loss from discontinued unit is listed with the net value after deducting income tax. Note 4: Financial data shall be listed with the corrected or restated numbers and be noted with the circumstances and reasons once the Company has been notified by the competent authority to make corrections or restatements by itself.

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Condensed Comprehensive Income Statement - Individual Unit: TWD thousand Year Financial data in the most recent 5 years

Item 2019 2018 2017 2016 2015 Operating revenue 7,203,554 7,405,726 6,833,550 6,925,150 7,013,072 Operating gross profit 1,410,577 1,495,962 1,311,488 1,413,961 1,585,102 Operating income 354,298 427,447 285,853 347,949 536,076 Non-operating revenue and expense 94,773 66,464 148,585 182,494 137,975 Net income before tax 449,071 493,911 434,438 530,443 674,051 Net income of going-concern 362,447 401,983 366,138 468,534 565,347 operation unit Loss from discontinued unit － － － － － Net income (loss) 362,447 401,983 366,138 468,534 565,347 Other comprehensive income 134,430 (263,481) (21,785) (198,973) (85,002) (Net amount after tax) Total comprehensive income 496,877 138,502 344,353 269,561 480,345 Net income attributable to owners of － － － － － the parent company Net income attributable to non- － － － － － controlling interests Comprehensive income attributable － － － － － to owners of the parent company Comprehensive income attributable － － － － － to non-controlling interests EPS 0.66 0.73 0.67 0.86 1.03

(II) Name of CPA and audited opinions

Year Name of CPA Audited opinions

Lily Lu Unqualified opinion with 2015 KPMG Chun-Hsiu Kuang explanatory language

Lily Lu 2016 - 2017 KPMG Unqualified opinion Chun-Hsiu Kuang

Ya-Ling Chen 2018 KPMG Unqualified opinion Chun-Hsiu Kuang

Chia-Chien Tang 2019 KPMG Unqualified opinion Ya-Ling Chen

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II. Financial analysis for the most recent 5 years (I) Financial analysis - consolidated financial statements

Year (Note 1) Financial analysis for the most recent 5 years Analysis items (Note 3) 2019 2018 2017 2016 2015 Financial Debt ratio 40 43 41 41 40 Structure Long term fund to property, plant and equipment 174 170 178 166 164 (%) ratio Liquidity Current ratio 158 162 185 152 141 analysis Quick ratio 67 66 81 66 65 (%) Interest coverage 5 6 7 9 12 Account receivable turnover (times) 5.4 5.3 5.2 5.1 5.0 Average collection turnover 68 69 71 71 74 Operating Inventory turnover (times) 2.0 2.1 2.1 2.2 2.3 Performanc Account payable turnover (times) 13.6 11.8 11.3 12.2 14.3 e Analysis Average inventory turnover days 182 175 172 163 162 PPE turnover (times) 1.7 1.7 1.6 1.7 1.8 Total assets turnover(times) 0.7 0.7 0.7 0.7 0.7 ROA (%) 3 3 3 4 5 ROE (%) 4 5 5 6 7 Net income before tax to paid-up capital ratio (%) Profitability 8 9 9 10 14 (Note 7) Net margin (%) 4 4 4 5 6 EPS (TWD) 0.66 0.73 0.67 0.86 1.03 Cash flow ratio (%) 32 18 28 23 30 Cash flow Cash flow adequacy ratio (%) 97 79 95 91 80 Cash reinvestment ratio (%) 5 3 4 4 6 Operating leverage 6 5 6 5 4 Leverage Financial leverage 1.3 1.2 1.3 1.2 1.1 The reasons for the change of each financial ratio in the most recent two years: 1. The decrease of ROE ratio was mainly due to the decrease of net income. 2. The increase of cash flow ratio was mainly due to the increase of net cash flows from operating activities. 3. The increase of cash flow adequacy ratio was mainly due to the increase of net cash flows from operating activities and decrease of capital expense. 4. The increase of cash reinvestment ratio was mainly due to the increase of net cash flows from operating activities. 5. The increase of operating leverage was mainly due to the significant decrease of operating income. * If the Company has prepared individual financial statements, it shall also prepare the individual financial ratio analysis separately. * If the financial information prepared based on IFRSs refers to that for less than the most recent five years, the Company shall also prepare the financial information based on the R.O.C. Financial Accounting Standards as shown in the following Table (2): Not applicable.

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Financial analysis - individual financial statements

Year (Note 1) Financial analysis for the most recent 5 years

Analysis items (Note 3) 2019 2018 2017 2016 2015 Financial Debt ratio 35 39 37 35 35 Structure Long term fund to property, plant and 205 207 221 207 212 (%) equipment ratio Liquidity Current ratio 150 156 182 144 133 analysis Quick ratio 64 64 83 62 60 (%) Interest coverage 7 8 9 12 17 Account receivable turnover (times) 5.5 5.2 4.9 5.2 5.0 Average collection turnover 66 71 74 71 73 Operating Inventory turnover (times) 2.3 2.4 2.4 2.5 2.6 Performan Account payable turnover (times) 13.0 11.0 10.6 11.3 12.6 ce Analysis Average inventory turnover days 160 154 152 146 143 PPE turnover (times) 1.6 1.7 1.6 1.7 1.8 Total assets turnover(times) 0.6 0.6 0.6 0.6 0.6 ROA (%) 3 4 3 4 5 ROE (%) 5 5 5 6 8 Net income before tax to paid-up capital Profitability 8 9 8 10 13 ratio (%) (Note 7) Net margin (%) 5 6 5 7 9 EPS (TWD) 0.66 0.73 0.67 0.86 1.03 Cash flow ratio (%) 35 24 29 26 35 Cash flow Cash flow adequacy ratio (%) 90 66 62 71 67 Cash reinvestment ratio (%) 4 3 2 3 5 Operating leverage 5 5 7 6 3 Leverage Financial leverage 1.2 1.2 1.2 1.1 1.1 The reasons for the change of each financial ratio in the most recent two years: 1.The increase of cash flow ratio was mainly due to the increase of net cash flows from operating activities. 2.The increase of cash flow adequacy ratio was mainly due to the increase of net cash flows from operating activities and decrease of capital expense. 3.The increase of cash reinvestment ratio was mainly due to the increase of net cash flows from operating activities.

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Note 1: The years of which data has not been audited by the CPA shall be noted. Note 2: As of the date when the annual report is printed, companies that have been listed or whose stocks have been traded in the securities firm's business locations shall be analyzed together if they have the latest financial data audited by the CPA. Note 3: The following calculation formulas must be listed at the end of the foregoing table: 1. Financial structure (1) Debt ratio= Total Liabilities / Total Assets (2) Long-term funds to property, plant and equipment = (Total equity + Non-current liabilities) / Property, plant and equipment, net 2. Liquidity analysis (1) Current ratio = Current assets / Current liability (2) Quick ratio = (Current Assets - Inventories - Prepaid expenses) / Current liability (3) Times interest earned = Profit Before Credit for Income Tax / Current interest expense 3. Operating performance analysis (1) Average collection turnover (Including Accounts Receivable and Notes Receivable from operation) = Sales / Average trade receivables (2) Days to collect accounts receivable = 365 / Average collection turnover (3) Average inventory turnover = Cost of goods sold / Average inventories (4) Average payment turnover (Including Accounts Payable and Notes Payable from operation) = operating costs / Average trade payables (5) Average days to sell inventory = 365 / Average inventory turnover (6) Property, plant and equipment turnover rate = Net sales / average property, plant and equipment, net (7) Total assets turnover = Sales / Average total assets 4. Profitability (1) Rate of return on assets = [Profit + Interest expense x (1 - Tax rate)] / Average assets (2) Rate of return on equity = Profit / Average total Equity (3) Profit to sales = Profit / Sales (4) Earnings per share = (Equity attributable to owners of parent - Dividend-preferred stock) / Weighted average outstanding shares (Note 4) 5. Cash flow (1) Cash flow ratio = Net cash provided by operating activities / Current liability (2) Cash flow adequacy ratio = 5-year net cash provided by operating activities / 5-year (Capital expense + Increase in inventories + Cash dividend) (3) Cash flow reinvestment ratio = (Net cash provided by operating activities - Cash dividend) - (Property, plant and equipment, net + Long-term investments + Other non-current assets + Operating Capital) (Note 5) 6. Leverage: (1) Operating Leverage= (Net operating revenue – Variable cost and expense) / Operating income (Note 6) (2) Financial leverage = Operating income / (Operating income – Interest expenses) Note 4: Please note the following when measuring based on said calculation of EPS: 1. Based on the number of weighted average common shares, instead of the number of shares already issued at the end of year. 2. In the event of cash capital increase or exchange of treasury stock, please take the outstanding period into consideration when calculating the weighted average outstanding shares. 3. In the event of recapitalization of earnings or capital surplus, the calculation of annual and semi-annual EPS in the past shall be adjusted retroactively subject to the capital increase ratio, without taking the issuance period for the capital increase into consideration. 4. If the preferred stock refers to non-convertible accumulated preferred stock, the current stock dividend (whether allocated or not) shall be deducted from the net income after tax, or the net loss after tax should be increased. If the preferred stock refers to non- accumulated preferred stock, the preferred stock dividend shall be deducted from the net income after tax, if any, provided that if the Company suffers loss, it is not necessary to make the adjustment. Note 5: Please note the following when measuring under cash flow analysis: 1. The net cash flow from operating activities means the net cash inflow from operating activities in the statement of cash flow. 2. The capital expenditure means the cash outflow from the capital investment each year. 3. The increase in inventory will be included only when the balance at ending is more than the balance at beginning. If the inventory decreases at the end of year, it should be calculated as 0. 4. The cash dividend includes the cash dividend on common stock and preferred stock. 5. The gross of property, plant and equipment means the total property, plant and equipment before deduction of accumulated depreciation. Note 6: The issuer shall categorize various operating costs and expenses into fixed and floating ones by nature. If any estimation or subjective judgment is involved, please note the reasonableness and consistency thereof. Note 7: If the Company’s stock is a no-par-value stock or stock with par value other than TWD10, the paid-in capital ratio mentioned above shall be calculated based on the percentage of the equity attributed to owners of parent company in the balance sheet.

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III. Audit Report of Audit Committee

Audit Committee’s Review Report, Everlight Chemical Industrial Corporation

The Board of Directors have prepared the Company’s 2019 Business Report, financial reports and the Motion of Earnings Distribution, etc., among which the financial reports have been audited by CPAs of KPMG, Chia-Chien Tang and Ya-Ling Chen, who have also prepared the audit reports. After the above Business Report, financial reports and the Motion of Earnings Distribution have been audited, the Audit Committee does not regard them as inappropriate and thus submits the report as above in accordance with the Securities and Exchange Act and Company Act. Yours sincerely To

The Company’s 2020 General Shareholders’ Meeting

Convener of Audit Committee, Wu, Chung-Fern

Mar. 19, 2020

IV. If any financial problems are encountered by the Company and its affiliates which might affect the financial conditions of the Company in the most recent year and until the date of publication of this annual report, their impacts on the Company’s financial condition shall be clarified: None.

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V. Comparative analysis of financial conditions Unit: TWD thousand Difference Year 2019 2018 Item Dollar amount %

Current assets 6,302,008 6,577,789 (275,781) (4)

Property, plant and equipment 5,527,737 5,754,565 (226,828) (4)

Intangible assets 122,455 131,270 (8,815) (7)

Other non-current assets 1,671,162 1,394,402 276,760 20

Total assets 13,623,362 13,858,026 (234,664) (2)

Current liabilities 3,982,351 4,070,946 (88,595) (2)

Non-Current liabilities 1,502,292 1,873,884 (371,592) (20)

Total liabilities 5,484,643 5,944,830 (460,187) (8)

Capital stock 5,477,522 5,477,522 0 －

Capital surplus 474,558 473,558 1,000 0

Retained earnings 1,901,498 1,797,826 103,672 6

Other equity (30,438) (149,767) 119,329 (80)

Non-controlling interests 315,579 314,057 1,522 0

Shareholders' equity 8,138,719 7,913,196 225,523 3

1. The main reasons for the significant changes of assets, liabilities and equity in the most recent two (2) years: (1) The increase of other non-current assets was mainly due to the increase of right-of-use asset. (2) The decrease of non-current liabilities was mainly due to the decrease of long-term borrowings. (3) The increase of other equity was mainly due to the decrease of “unrealized gains (loss) on financial assets measured at fair value through other comprehensive income” last year and increase this year.

2. Future response plan for matters with significant influence: There are no matters that have significant influence on the Company’s financial condition.

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VI. Financial performance Unit: TWD thousand Increase Year 2019 2018 (decrease) dollar Changes % Item amount Operating revenue 9,332,076 9,621,019 (288,943) (3) Operating cost 7,294,736 7,455,801 (161,065) (2) Operating gross profit 2,037,340 2,165,218 (127,878) (6) Operating expense 1,633,707 1,657,754 (24,047) (1) Net operating profit 403,633 507,464 (103,831) (20) Non-operating revenue and 52,437 12,080 40,357 334 expense Pre-tax profit of going-concern 456,070 519,544 (63,474) (12) operation department Income tax expense 106,833 111,624 (4,791) (4) Net income after tax of going- 349,237 407,920 (58,683) (14) concern operation department 1. The main reasons for the significant changes of operating revenue, operating income and pre-tax income in the most recent two (2) years: (1) The decrease of operating income with the previous period was mainly due to the decrease of operating revenue. (2) The increase of non-operating revenue and expense was mainly due to the increase of dividend income, subsidy revenue and others etc. compared with previous year. 2. For expected sales volume and its reference, please refer to Summary of 2020 Operation Plan. 3. Possible impacts on the Company’s future financial operations and response measures: There are no significant impacts.

VII. Cash Flows (I) The analysis of cash flow changes during recent year and corrective measures to be taken in response to illiquidity 1. The increase of cash flow ratio was mainly due to the increase of net cash flows from operating activities and the decrease of current liabilities compared with last period. 2. The increase of cash flow adequacy ratio was mainly due to the increase of net cash flows from operating activities in the most current five (5) years. 3. The increase of cash reinvestment ratio was mainly due to the increase of net cash flows from operating activities compared with last period. 4. Corrective measures to be taken in response to insufficient liquidity: Not applicable. (II) Liquidity analysis for the coming year: Unit: TWD thousand Expected net cash Expected Countermeasures against Expected Cash - beginning flow from operating cash balance cash insufficiency cash outflow balance (1) activities for the year (insufficiency) Investment Wealth (3) (2) (1)＋(2)－(3) plan management plan 978,856 1,308,000 1,124,000 1,162,856 0 0 1. Net cash flows from operating activities: mainly due to the increase of profit, depreciation recognition and accounts payable. 2. Cash outflows: mainly due to the payment of each factory’s significant capital expenditure and the payment of cash dividends, etc.

VIII. Impact of major capital expenditures on financial operations in the most recent year Not applicable; there are no significant impacts on the Company’s financial operations.

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IX. Reinvestment policy in the most recent year, the main reasons for the profit or loss, improvement plans and investment plans in the upcoming year：Not applicable

X. Risk Items

(I) Risk management policy The Company’s risk management policy is “implementing risk management and ensuring sustainability operation,” which has been discussed and passed by the Board of Directors on Nov. 14, 2013.

(II) Risk management strategy 1. Establishing risk management strategy for the Group’s operation. 2. Implementing educational trainings to strengthen the staff’s risk awareness. 3. Providing insight about the fluctuation trend of operation environment. 4. Abiding by international product safety rules. 5. Ensuring industrial safety and environmental protection.

(III) Risk management organization The Company has set up Risk Management Committee, which is convened by the Chairman and participated by the General Manager and supervisors of production, R&D, security and environmental protection, human resources, finance, procurement, auditing. Committee meetings are regularly held to discuss related issues. In 2009, the Business Continuity Management System (BCMS) introduced by the Company is part of the Group's risk management system. It passed BS25999 certification in 2012 and ISO22301 certification in 2014. Each year, an inspection by the third party will be conducted to ensure the effectiveness of the management system. The Company's major risk management organizations and various implementation and dedicated units of risk management are as follows: 1. Financial risk, liquidity risk, credit risk and legal risk: The financial accounting and legal units formulate and implement various strategies, and take various response measures according to the analysis of laws, policies and market changes. The Audit Office controls over and audits on the risk items mentioned above. 2. Market risk: In addition to the operational responsibilities of each business unit and functional units, the Company sets various strategies and implements them, and evaluates to adopt various response measures according to the analysis of laws, policies and market changes. The decision-making level and the management team of each business division sets up a project team whenever necessary to control the risks caused by the rapid changes of the market. 3. Strategic operational risk: The risk assessment of the annual operating policy is carried out by the General Manager Office and the management team of each business division, and performance tracking is conducted regularly to ensure that the operational strategy is in line with the Company's vision and can achieve operational objectives. 4. Supply chain risk: Research Management Division will conduct risk assessment according to government regulations and policies, changes in markets and production needs; it will collaborate with production and marketing units to take countermeasures, so as to mitigate operating impact caused by “interruption in the supplies.” 5. Information safety risk: For system maintenance of the internal data system and prevention of external threat, the Information Division has undertaken effective protective mechanism (upgrading hardware infrastructure and introducing ISO 27001), to mitigate information safety risk.

(IV)Various risk evaluation The analysis for the risk items in the latest annual report and up to the date when the annual report was printed is as follows: 1. The influence of changes in interest rates and exchange rates and inflation on the Group’s profit and loss and future countermeasures: (1) Changes in interest rates: The currencies of the Group’s borrowings are mainly in USD and NTD. For the future trend of these two currencies in the coming year, for USD, due to the escalation of the outbreak of Covid-19 virus, in March, FED had already cut the fund rate by 100 basis points and interest rates to zero to simulate the economy. As for NTD, due to the slowdown of global economy, under the influence of a downward inflation outlook, low federal fund rate and other factors, CBC (Central Bank of the Republic of China) also decided to cut interest rates by 0.25 percentage points in the same month. The short-term and long-term borrowings of the Group are debts with floating interest rates. Changes in market interest rates will cause the effective interest rates of short-term and long-term borrowings to change, which will cause future cash flows to fluctuate. If market interest rate increases by 1%, the Group’s interest expenses will increase by about TWD 30 ~ 40 million. The Group will continue to closely observe the trend of interest rates, and use interest rate hedging or other capital market financing channels in a timely manner to control the Group's financing costs to a relatively low point of market interest rates.

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(2) Exchange rate fluctuation: The Group's import and export is mainly based on USD and RMB. It is estimated that the appreciation of one NTD will reduce the Group's net profit margin by approximately 1%. The Group's foreign exchange policy is based on the principle that the foreign exchange position is self-squared, and the surplus or needed parts of the account are hedged in a timely manner. In addition, the Group's borrowings of Everlight (Suzhou) Advanced Chemicals Ltd., a subsidiary in Mainland China, was unable to be hedged because they are USD borrowings of foreign debts. The Group has consulted the bank to lend in RMB to facilitate the self-squaring of foreign exchange position to reduce the risk. (3) Inflation: According to the prediction of the Directorate General of Budget, Accounting and Statistics, Executive Yuan, the annual rate of increase in consumer price index was only 0.62 % in 2020, and inflation outlook 67 remains moderate. Meanwhile, the outbreak of Covid-19 virus impacts the global economy, suppressing the prices of oil and other raw materials. The global inflation is expected to go downward in 2020. 2. The policy, main reasons for the profit or loss, and future response measures of high risk, high leverage investment, lending of capital, endorsements and guarantees and derivatives tradings: (1) The Company does not engage in investments of high risk and high leverage. (2) Lending of capital, endorsements and guarantees: The purpose of the Company's lending of capital and endorsements and guarantees is to deal with the fund transfer within the group, which is handled according to the “Management Rules for Lending of Capital, Endorsements and Guarantees” formulated by the Company in accordance with government regulations. For the Company's lending of capital, endorsements and guarantees in 2018, please refer to Appendix Table 1 and 2 of Consolidated Financial Report. (3) Derivatives tradings: The Company's derivatives tradings are for the purpose of hedging (including financial hedging) and the trading commodities should be selected to avoid the risks arising from the Company's business operations, which are based on the Company's “Regulations Governing Derivatives Transactions” in accordance with government regulations. In order to avoid the impact of exchange rate changes, the derivatives business of foreign exchange in 2019 was mainly foreign currency option contracts. For its profit or loss, please refer to the notes about financial products in Consolidated Financial Report. In addition, since Mar. 1, 2016, the FSC has set up many restrictions on financial derivative products. The Company will continue to pay attention to the exchange rate changes of the foreign currencies held and abide by relevant operational regulations of the competent authority. The restrictions mentioned above have not had a significant impact on the financial operations of the Company. 3. Research and development (R&D) plans to be carried out in the future and the expected R&D expenditures: For sustainability operation and international development, Everlight Chemical is expected to invest TWD420 million in R&D expense in 2020. For future R&D plans, please refer to the section of Operational Profile about the new products planned to be developed. 4. The influence of important policies and changes in laws at home and abroad on the Company’s financial business and the countermeasures: The Company has established business legal compliance and management system to observe the government policies and regulations. Corresponding units are able to pay close attention to important policies and the change of law, collaborating to make adjustments to the internal processes and operating activities of the Company, so as to ensure the operation is running smoothly. 5. The influence of scientific and technological change and industrial transformation on the Company’s financial business and the countermeasures: Artificial intelligence, cloud computing and Industry 4.0, will whip up the huge waves of changes in the industrial intelligence technology. There will be an estimated influence on the Company’s financial business. Based on sustainable development and response to climate change, all businesses have been moving toward a trend of low-carbon environmental protection. Everlight Chemical takes a “low-carbon green energy” as the response strategy for product innovation and R&D. We do not use harmful substances but rather conduct R&D on green chemical processes, providing global customers green solutions, and sustainable new products which customers can safely use. With the evolution of automation technology of Industry 4.0, Everlight Chemical also promotes automated production technology. Accordingly, technology and industry changes are beneficial to Everlight Chemical. 6. Effect of corporate image change on the Company's crisis management, and measures to be taken in response: Since its establishment, the Company has been adhering to the business principle of "decent management," doing the right thing in the spirit of honesty, law-abiding and fairness, establishing a good reputation and image, and has been well received by all circles. There are no risks of changing business image. 7. Expected benefits and possible risks associated with any merger and acquisitions, and response measures to be taken: As of the printed date, there are no plans for merger and acquisition, and thus is not applicable here. 8. Expected benefit and possible risk associated with plant expansion, and measures to be taken in response: None. 9. Risks associated with purchasing or sales consolidation, and measures to be taken in response: The amount of single customer or supplier of the Company in 2019 was less than 10% of the total sales or purchase amount, and there was no risk of concentrated sales.

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10. Effect upon and risk to the Company in the event a major quantity of shares held by a director or a major shareholder with more than 10% shareholding has been transferred or changed hands, and measures to be taken in response: The directors of the Company and the major shareholder holding more than 10% of the shares have no significant transfer of shares and replacement of seats, which has no impacts on the Company and no special response measures are required. 11. Effect upon and risk to Company associated with any change in governance personnel or top management, and measures to be taken in response: The major shareholders of the Company all focused on the operation of their own business, and harmoniously and unanimously support the development of the Company's various business development. There should be no risk of changes in management rights, and no special response measures are required. 12. Litigious and non-litigious matters: List major litigious, non-litigious or administrative disputes that involve the Company and/or any of the Company’s directors, supervisors, general manager, any persons with actual responsibility for the Company, any major shareholder holding a stake of greater than 10 percent, and/or any company or companies controlled by the Company and have been concluded by means of a final and unappealable judgment, or are still under litigation. Where such a dispute could materially affect shareholders' equity or the prices of the Company's securities, the annual report shall disclose the facts of the dispute, amount of money at stake in the dispute, the date of litigation commencement, the main parties to the dispute, and the status of the dispute as of the date of publication of the annual report. None of the above-mentioned people of the Company have the conditions mentioned in the previous paragraph. 13. Other important risks and response measures: To implement information security and personal information protection management, the Company set up the Information Safety and Personal Information Management Committee in 2016. After evaluation, currently the information security threat issues that cause the organization not being operational are mainly cyber-attacks, data leaks, and unexpected information service interruptions. The Company takes the following measures in response to these information security threats: (1) For cyber-attacks, mainly referring to ransomware and hacking, other than strengthening the defense functions of firewall on the equipment, intercepting and filtering malicious messages and making updates to antivirus software and operating systems and data backup, the Company also instructs on information security risks and strengthens awareness of information security on a regular basis. (2) For confidential information leakage, the Company not only introduces the trade secret project counseling, but also strengthens account authorization management, and implements the file encryption system in the aspect of information, to reinforce the control of confidential files and prevent leakage of confidential information. (3) For unexpected information services interruption, the Company formulates the Business Continuity Plan in regard to information risks, adopts virtual host remote backup, remote data storage, signing backup contracts with the manufacturers for important equipment and other measures, and also conducts periodic exercises to ensure uninterrupted operations.

In July 2019, Information Safety and Personal Information Management Committee passed a resolution to seek external consultation, and in December of the same year, established “Introduction and Verification of Information Safety Management.” The information safety management system is expected to pass ISO 27001 certification in 2020.

There have been no major cyber-attacks or security incidents in the Company and no significant negative impact on the Company’s business and operations management during 2019 or during the current fiscal year up to the date of publication of the annual report.

XI. Other important matters: None.

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Special Disclosure

I. Information Related to the Company's Affiliates (I) Overview of affiliates 1. Affiliates’ Organizational Chart: Mar. 30, 2020

50% Elite, Turkey

100% Everlight U.S.A.

100%

Everlight Chemical Industrial Corporation Everlight (Hongkong) Ltd. 100% Ethical (Shanghai) Ltd.

100% Everlight Europe B.V. 100% (Netherlands) Ethical (Guangzhou) Ltd.

100% 100% Everlight (Singapore) Ltd. Everlight (Shanghai) Ltd.

100% 76.15% Everlight (Suzhou) Advanced Trend Tone Imaging, Inc. Chemicals Ltd.

56.25% Anda Semiconductor 91.26% Technology (Suzhou) Co., DailyCare BioMedical Inc. Ltd

100%

Shanghai Anda International 100% Evershine Investment Corp. Trading Co., Ltd.

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2. Basic information of affiliates: Unit: TWD thousand Date of Name of business Address Paid-in capital Scope of business/production establishment Parent company Color chemicals, Specialty Everlight Chemical Industrial Sep. 7, 1972 Taipei City NTD 5,477,522 chemicals, pharmaceuticals, Corporation and electronic chemicals Merchandising chemical Elite, Turkey Apr. 24, 1989 Turkey USD 5,604 products and materials Merchandising chemical Everlight U.S.A. Apr. 3, 1991 USA USD 3,000 products and materials Merchandising chemical Everlight (Hongkong) Ltd. Jun. 23, 1992 Hong Kong HKD 10,000 products and materials Everlight Europe B.V. Merchandising chemical Dec. 18, 1996 Netherlands EUR 227 (Netherlands) products and materials Everlight (Singapore) Ltd. Dec. 18, 1997 Singapore USD 24,300 Investment as profession Production and sale of toner and cartridges for laser Trend Tone Imaging, Inc. Apr. 9, 1990 Hsinchu City NTD 589,680 printers, photocopiers and fax machines Merchandising chemical Ethical (Shanghai) Ltd. Apr. 6, 1998 Shanghai USD 1,700 products and materials Merchandising chemical Ethical (Guangzhou) Ltd. Dec. 30, 2001 Guangzhou USD 700 products and materials Merchandising chemical Everlight (Shanghai) Ltd. Nov. 15, 2005 Shanghai USD 1,250 products and materials Production and sale of high- Everlight (Suzhou) Advanced Mar. 15, 2006 Suzhou USD 20,000 tech chemicals for toner and Chemicals Ltd. electronics Anda Semiconductor Sale of high-tech chemicals Technology (Suzhou) Co., Dec. 18, 2002 Suzhou USD 1,200 for electronics Ltd. Shanghai Anda International Sale of high-tech chemicals Apr. 28, 2011 Shanghai RMB 1,000 Trading Co., Ltd. for electronics Production of medical Taoyuan DailyCare BioMedical Inc. Nov. 14, 2003 NTD 69,300 equipment and provision of County biotechnology services Evershine Investment Corp. Oct. 28, 2013 Taipei City NTD 100,000 Investment as profession

3. Presumptive reasons for the presumption of control and subordinate relationship and related information of personnel: None. 4. The industries covered by the business operations of overall affiliates and the division of labor: (1) All the remaining industries are chemical engineering, except that Evershine Investment Corp. is an investment business and that DailyCare BioMedical Inc. belongs to the medical equipment industry. (2) Everlight (Singapore) Ltd. is a holding company that indirectly invests in Mainland China. (3) Everlight U.S.A., Everlight Europe B.V. (Netherlands), Everlight (Hongkong) Ltd. and Elite, Turkey are overseas subsidiaries of the Company, which mainly engage in the sales of the parent company’s products. (4) Ethical (Shanghai) Ltd., Everlight (Shanghai) Ltd. and Ethical (Guangzhou) Ltd., Everlight (Suzhou) Advanced Chemicals Ltd. and Anda Semiconductor Technology (Suzhou) Co., Ltd. are the Company’s reinvested companies of subsidiaries in China; the remaining companies all focus on selling the products of the parent company, except that Everlight (Suzhou) Advanced Chemicals Ltd. produces and sells the parent company’s color chemicals, electronic chemicals and the toner of affiliates, and that Anda Semiconductor Technology (Suzhou) Co., Ltd. focuses on the sales of electronic chemicals. (5) Shanghai Anda International Trading Co., Ltd. is the reinvested company of Anda Semiconductor Technology (Suzhou) Co., Ltd., which focuses on the sales of Anda Semiconductor Technology (Suzhou) Co., Ltd.

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5. Information of directors, supervisors and general manager of the Company’s affiliates: Mar. 29, 2019 Shareholding Share Shareholdi Name of business Title Name or representative number ng ratio (shares) (%) Chairman and General SAMİR GÜNAŞTI 3,942 9.00 Manager Director DILER GÜNAŞTI 5,685 12.98 Everlight Chemical Industrial Vice Chairman Corporation Representative, Chen, Chien-Hsin Everlight Chemical Industrial Director Corporation Representative, Chen, Wei-Wang Elite, Turkey 21,900 50.00 Everlight Chemical Industrial Director Corporation Representative, Yang, Bao-Tai Everlight Chemical Industrial Supervisor Corporation Representative, Lee, Ming-Wen Independent SELÇUK YÜCEL 0 0 Supervisor Independent FARUK DELEN 0 0 Supervisor Everlight Chemical Industrial Chairman Corporation Representative, Chen, Wei-Wang Everlight Chemical Industrial Corporation Director Representative, Chen, Chong- Kuang Everlight Chemical Industrial Everlight U.S.A. Director Corporation 300,000 100.00 Representative, Kuo-Pin Weng Everlight Chemical Industrial Director and Corporation General manager Representative, Chen, Chien- Ming Everlight Chemical Industrial Director Corporation Representative, Tsai, Kuang-Feng Everlight Chemical Industrial Chairman Corporation Representative, Chen, Wei-Wang Everlight Chemical Industrial Corporation Director 1,000,000 100.00 Everlight (Hongkong) Ltd. Representative, Hsiao, Chong- Kun Everlight Chemical Industrial Director Corporation Representative, Lee, Ming-Wen Manager Hsu, Jei-Kuang 00 Everlight Chemical Industrial Chairman Corporation Representative, Chen, Wei-Wang Everlight Chemical Industrial Everlight Europe B.V. Director Corporation 500 100.00 (Netherlands) Representative, Tsai, Kuang-Feng Everlight Chemical Industrial Chairman and Corporation General manager Representative, Yang, Bao-Tai

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Shareholding Share Shareholdi Name of business Title Name or representative number ng ratio (shares) (%) Everlight Chemical Industrial Chairman Corporation Representative, Chen, Chien-Hsin Everlight Chemical Industrial Director Corporation 24,300,000 100.00 Everlight (Singapore) Ltd. Representative, Kuo-Pin Weng Everlight Chemical Industrial Chairman and Corporation Manager Representative, Lee, Ming-Wen Director Tan Hwa Seng 0 0 Everlight Chemical Industrial Chairman Corporation Representative, Chen, Chien-Hsin Everlight Chemical Industrial Director Corporation Representative, Chen, Wei-Wang Everlight Chemical Industrial Director Corporation Representative, Chen, Chien-Ming Everlight Chemical Industrial 44,906,400 76.15 Director Corporation Trend Tone Imaging, Inc. Representative, Jason Ju Everlight Chemical Industrial Corporation Director Representative, Huang, Dong- Sheng Everlight Chemical Industrial Chairman and Corporation General manager Representative, Chiu, Gui-Ying Director OuYang, Jin-Kun 46,787 0.08 Supervisor Huang, Qing-Yuan 996,317 1.69 Yung-De Investment Co., Ltd. Supervisor 4,667,750 7.92 Representative, Kuo-Pin Weng Representative of Everlight Chairman (Singapore) Ltd., Chen, Wei-Wang Representative of Everlight Director (Singapore) Ltd., Hsiao, Chong- USD1,700,0 Kun 100.00 Ethical (Shanghai) Ltd. 00 Representative of Everlight Director (Singapore) Ltd., Kuo-Pin Weng Representative of Everlight Supervisor (Singapore) Ltd., Chen, Ru-Aei General manager Liao, Nan-Ming 0 0 Representative of Everlight Chairman (Singapore) Ltd., Chen, Wei-Wang Representative of Everlight Director (Singapore) Ltd., Hsiao, Chong- Kun USD700,000 100.00 Ethical (Guangzhou) Ltd. Representative of Everlight Director (Singapore) Ltd., Kuo-Pin Weng Representative of Everlight Supervisor (Singapore) Ltd., Lee, Ming-Wen General manager Chen, Yi-Tang 0 0

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Shareholding Share Shareholdi Name of business Title Name or representative number ng ratio (shares) (%) Representative of Everlight Chairman (Singapore) Ltd., Chen, Wei-Wang Representative of Everlight Director (Singapore) Ltd., Hsiao, Chong- USD1,250,0 Kun 100.00 Everlight (Shanghai) Ltd. 00 Representative of Everlight Director (Singapore) Ltd., Kuo-Pin Weng Representative of Everlight Supervisor (Singapore) Ltd., Chen, Ru-Aei General manager Liao, Nan-Ming 0 0 Representative of Everlight Chairman (Singapore) Ltd., Du, Yi-Zhong Representative of Everlight Director (Singapore) Ltd., Chen, Wei-Wang Representative of Everlight Director (Singapore) Ltd., Huang, Dong- Everlight (Suzhou) Advanced USD20,000, Sheng 100.00 Chemicals Ltd. 000 Representative of Everlight Director (Singapore) Ltd., Cao, Yin Director and Representative of Everlight General manager (Singapore) Ltd., Jason Ju Representative of Everlight Supervisor (Singapore) Ltd., Liao, Nan-Ming Anda Technology Pte Ltd Chairman Representative, Cao, Yin USD525,000 43.75 Anda Technology Pte Ltd Director Representative, Tao, Yu-Jui Representative of Everlight Anda Semiconductor Director (Singapore) Ltd., Chen, Wei-Wang Technology (Suzhou) Co., Representative of Everlight Ltd. Director (Singapore) Ltd., Jason Ju USD675,000 56.25 Director and Representative of Everlight General manager (Singapore) Ltd., Sun, Zhe-Ren Representative of Everlight Supervisor (Singapore) Ltd., Chen, Ru-Aei Anda Semiconductor Technology Chairman (Suzhou) Representative, Cao, Yin Anda Semiconductor Technology Director (Suzhou)Representative, Jason Ju RMB1,000,0 Anda Semiconductor Technology 100.00 00 Director (Suzhou)Representative, Tao, Yu- Shanghai Anda International Ju Trading Co., Ltd. Anda Semiconductor Technology Supervisor (Suzhou)Representative, Chen, Ru-Aei General manager Sun, Zhe-Ren 0 0 Everlight Chemical Industrial Supervisor Corporation Representative, Kuo-Pin Weng

75

Shareholding Share Shareholdi Name of business Title Name or representative number ng ratio (shares) (%) Everlight Chemical Industrial Chairman Corporation Representative, Chen, Chien-Hsin Everlight Chemical Industrial Director Corporation 6,324,538 91.26 DailyCare BioMedical Inc. Representative, Chan, Po - Yuan Everlight Chemical Industrial Director Corporation Representative, Lee, Ming-Wen Chuan Ren Chung Yuan Business Supervisor 9,100 0.13 Incubating investment Co., Ltd. Everlight Chemical Industrial Chairman Corporation Representative, Huang, Hui-Cing Everlight Chemical Industrial Evershine Investment Corp. Director Corporation 10,000,000 100.00 Representative, Du, Yi-Zhong Everlight Chemical Industrial Director Corporation Chen Ke-lun Representative,

76

(II) Operational highlights of business of various affiliates Unit: TWD thousand Dec. 31, 2018 Net income for the EPS Capital Total Total Operating Operating Name of business Net worth current (TWD) amount assets liabilities revenue profit period (after tax) (after tax) Parent company Everlight Chemical 5,477,522 11,957,477 4,134,337 7,823,140 7,203,554 354,298 362,447 0.66 Industrial Corporation Elite, Turkey 156,320 343,713 136,147 207,566 580,066 5,512 8,464 193.24 Everlight U.S.A. 86,825 251,149 133,985 117,164 590,135 580 3,356 11.19 Everlight (Hongkong) 34,580 53,701 10,668 43,033 160,895 4,339 4,377 4.38 Ltd. Everlight Europe B.V. 7,890 143,944 90,255 53,689 738,810 10,782 19,453 38,906 (Netherlands) Everlight (Singapore) 779,115 906,934 26,997 879,937 0 0 13,858 0.57 Ltd. Trend Tone Imaging, 589,680 1,630,387 775,871 854,516 1,050,047 12,163 6,168 0.10 Inc. Ethical (Shanghai) Ltd. 53,326 187,255 54,333 132,922 206,755 7,748 7,603 － Ethical (Guangzhou) 22,919 141,790 73,644 68,146 162,176 3,454 3,950 － Ltd. Everlight (Shanghai) 39,931 225,385 84,426 140,959 401,548 18,771 12,984 － Ltd. Everlight (Suzhou) Advanced Chemicals 638,427 976,915 499,887 477,028 1,013,997 8,596 (13,489) － Ltd. Anda Semiconductor Technology (Suzhou) 37,331 91,415 75,384 16,031 163,344 (2,307) (3,540) － Co., Ltd. DailyCare BioMedical 69,300 12,410 792 11,618 4,556 (10,339) (10,545) (1.52) Inc. Evershine Investment 100,000 39,964 50 39,914 0 (14,412) (14,412) (1.44) Corp. Note 1: The numbers of Anda Semiconductor Technology (Suzhou) Co., Ltd. are the combined ones including Shanghai Anda International Trading Co., Ltd. Note 2: If affiliates are foreign companies, related numbers are listed with NT dollars exchanged at the rate on the reporting date.

77

(III) Consolidated financial statements of affiliates

Declaration

The Company is required to prepare consolidated financial statements for year 2019 (from January 1 to December 31, 2019) with its subsidiaries under the “Standards for the Preparation of Consolidated Report on Operation, Consolidated Financial Statements, and Report on Affiliations between Parent and Subsidiaries”. Subsidiaries to be included in the consolidated financial statements are identical to that prepared in accordance with IFRS 10 recognized by the FSC, and operation performance of such subsidiaries has been included in the disclosure of the aforementioned consolidated financial statement between parent and subsidiaries and therefore will not be prepared separately.

Issued by

Company name: Everlight Chemical Industrial Corporation

Chairman: Chen, Chien-Hsin

Date: Mar. 19, 2020

(IV) Affiliation Reports: None.

II. Status of private placement of securities: None.

III. Holding or disposal of shares in the Company by the Company's subsidiaries in the most recent year and until the date of publication of the annual report: None.

IV. Other Necessary Supplementary Explanations: None.

V. Any occurrence of the Matters Defined in Term 2, Provision 2, Article 36 of Securities Exchange Act that Have a Significant Impact on Shareholders’ Equity or Security Price during the most recent year and up to the date of publication of this annual report: None.

78 Eight. Financial Report

I. Consolidated Financial Report

KPMG 台北市11049信義路5段7號68樓(台北101大樓) Telephone 電話 + 886 (2) 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Fax 傳真 + 886 (2) 8101 6667 Xinyi Road, Taipei City 11049, Taiwan, (R.O.C.) Internet 網址 kpmg.com/tw

Independent Auditors' Report

To the Board of Directors of Everlight Chemical Industrial Corporation:

Opinion

We have audited the consolidated financial statements of Everlight Chemical Industrial Corporation and its subsidiaries (“the Group”), which comprise the consolidated balance sheets as of December 31, 2019 and 2018, the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards(“IFRSs”), International Accounting Standards (“IASs”), Interpretation developed by the International Financial Reporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit of the consolidated financial statements as of and for the year ended December 31, 2019 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, Rule No. 1090360805 issued by the FSC, and the auditing standards generally accepted in the Republic of China. Furthermore, we conducted our audit of the consolidated financial statements as of and for the year ended December 31, 2018 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

79 1. Revenue recognition

Please refer to Note 4(n) “ Revenue” for accounting policy and Note 6(u) for the disclosure of revenue recognition to the consolidated financial statements.

Description of key audit matters

The Group is a listed company in related to public interest, and the investors are highly expecting the financial performance, resulting in revenue recognition is one of the key judgmental areas of our audit.

How the matter was addressed in our audit

Our major audit procedures included testing of the design and implement of controls over sales and collection of receivable transactions; evaluate if there is any significant abnormal changes through performing trend analysis on top 10 customers by comparing the related changes or differences; assessing and testing if the management obtained sufficient external evidence showing that the good controls of rewards of ownership have been transferred to the customers, to support the timing of revenue recognition; evaluating the adequacy of revenue recognition by testing the sale transactions during the period before and after the balance sheet date.

2. Valuation of accounts receivable

Please refer to Note 4(g) “Financial Instruments” for accounting policy, Note 5 for accounting assumption, judgments and estimation uncertainty of accounts receivable and Note 6(c) for the disclosure of the valuation of accounts receivable to the consolidated financial statements.

Description of key audit matters

Given the challenging economic climate, the risk of receivables recovery remains high, resulting in significant judgment being applied in the management's assessment of the recoverability of accounts receivable. Consequently, this is one of the key judgmental areas of our audit.

How the matter was addressed in our audit

Our major audit procedures included testing the adequacy of the formula of the calculation for the expected loss rate; testing the adequacy of aging report by tracing to related vouchers; evaluating the appropriateness of loss allowance and expected credit loss by testing if the loss allowance was made by expected loss rate; assessing if the evaluation document of loss allowance for accounts receivable was compliance with the Group's accounting policy; evaluating the adequacy of the disclosure of loss allowance for accounts receivable prepared by management.

Other Matter

Everlight Chemical Industrial Corporation has prepared its parent-company-only financial statements as of and for the years ended December 31, 2019 and 2018, on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

80 In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including the Audit committee) are responsible for overseeing the Group's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

81 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors' report are Chia-Chien Tang and Ya-Ling Chen.

KPMG

Taipei, Taiwan (Republic of China) March 19, 2020

Notes to Readers The accompanying consolidated financial statements are intended only to present the consolidated statement of financial position, financial performance and cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

The independent auditors’ audit report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ audit report and consolidated financial statements, the Chinese version shall prevail.

82 (English Translation of Consolidated Financial Statements Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2019 and 2018 (Expressed in Thousands New Taiwan Dollars)

December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Assets Amount % Amount % Liabilities and Equity Amount % Amount % Current assets: Current liabilities: 1100 Cash and cash equivalents (note 6(a)) $ 978,856 7 838,593 6 2100 Short-term borrowings (note 6(l)) $ 2,473,321 18 2,589,403 19 1110 Financial assets at fair value through profit or loss-current (note 6(b)) 30,023 - 13,556 - 2322 Long-term borrowings, current portion (note 6(m)) 470,000 3 185,000 1 1150 Notes receivable, net (notes 6(c) and (u)) 233,735 2 333,665 2 2151 Notes payable (note 7) 152,138 1 190,752 1 1170 Accounts receivable, net (notes 6(c) and (u)) 1,417,891 10 1,470,253 11 2170 Accounts payable (note 7) 295,375 2 438,743 3 130X Inventories (note 6(d)) 3,504,183 26 3,757,724 27 2209 Other payable (note 6(t)) 428,330 4 494,878 4 1476 Other current financial assets 25,032 - 29,031 - 2213 Payable on equipment 11,902 - 38,697 - 1479 Other current assets (note 6(i)) 112,288 1 134,967 1 2230 Current tax liabilities 69,118 1 77,128 1 Total current assets 6,302,008 46 6,577,789 47 2280 Lease liabilities-current (note 6(n)) 34,488 - - - Non-current assets: 2399 Other current liabilities 47,679 - 56,345 - 1517 Financial assets at fair value through other comprehensive income-non- Total current liabilities 3,982,351 29 4,070,946 29 83 current (notes 6(b) and (w)) 1,102,127 8 1,035,709 8 Non-current liabilities: 1550 Investments accounted for using equity method (note 6(e)) 126,934 1 135,803 1 2540 Long-term borrowings (note 6(m)) 989,748 7 1,538,988 11 1600 Property, plant and equipment (notes 6(f), (h) and 9) 5,527,737 41 5,754,565 42 2570 Deferred tax liabilities (note 6(q)) 70,208 1 68,933 1 1755 Right-of-use-assets (note 6(j)) 327,521 2 - - 2580 Lease liabilities non-current (note 6(n)) 274,557 2 - - 1780 Intangible assets (note 6(k)) 122,455 1 131,270 1 2640 Net defined benefit liability (note 6(p)) 167,779 1 265,963 2 1840 Deferred tax assets (note 6(q)) 75,957 1 119,722 1 Total non-current liabilities 1,502,292 11 1,873,884 14 1915 Prepayments for equipment 16,860 - 55,724 - Total liabilities 5,484,643 40 5,944,830 43 1980 Other non-current financial assets (note 6(c)) 4,191 - 4,762 - Equity attributable to owners of parent (notes 6(b), (e), (g), (p), (q), (r) 1985 Long-term prepaid rents - - 22,439 - and (w)): 1990 Other non-current assets 17,572 - 20,243 - 3100 Common shares 5,477,522 40 5,477,522 40 Total non-current assets 7,321,354 54 7,280,237 53 3200 Capital surplus 474,558 4 473,558 3 3300 Retained earnings 1,901,498 14 1,797,826 13 3400 Other equity (30,438) - (149,767) (1) Total equity attributable to owners of parent 7,823,140 58 7,599,139 55 36XX Non-controlling interests (notes 6(g) and (r)) 315,579 2 314,057 2 Total equity 8,138,719 60 7,913,196 57 Total assets $ 13,623,362 100 13,858,026 100 Total liabilities and equity $ 13,623,362 100 13,858,026 100

See accompanying notes to consolidated financial statements. (English Translation of Consolidated Financial Statements Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Comprehensive Income For the years ended December 31, 2019 and 2018 (Expressed in Thousands of New Taiwan Dollars Except for Earnings Per Share)

2019 2018 Amount % Amount % 4000 Operating revenue (note 6(u)) $ 9,332,076 100 9,621,019 100 5000 Operating costs (notes 6(d), (h), (j), (k), (n), (o), (p), (t), 7 and 12) 7,294,736 78 7,455,801 78 5950 Gross profit from operations 2,037,340 22 2,165,218 22 6000 Operating expenses (notes 6(c), (h), (j), (k), (n), (o), (p), (t), 7 and 12): 6100 Selling expenses 843,205 9 857,874 9 6200 Administrative expenses 349,277 4 350,388 4 6300 Research and development expenses 434,190 5 430,979 4 6450 Expected credit loss 7,035 - 18,513 - Total operating expenses 1,633,707 18 1,657,754 17 6900 Net operating income 403,633 4 507,464 5 7000 Non-operating income and expenses (notes 6(b), (e), (h), (m), (n) and (v)): 7010 Other income 58,582 1 48,639 - 7020 Other gains and losses 88,159 1 61,576 1 7050 Finance costs (96,284) (1) (90,824) (1) 7060 Share of gains (losses) of associates accounted for using equity method 1,980 - (7,311) - Total non-operating income and expense 52,437 1 12,080 - 7900 Income before income tax 456,070 5 519,544 5 7951 Income tax expenses (note (q)) 106,833 1 111,624 1 8200 Net income 349,237 4 407,920 4 8300 Other comprehensive income (notes 6(e), (p), (q), (r) and (w)): 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Gains (losses) on remeasurements of defined benefit plans 49,102 1 (11,898) - 8316 Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income 139,876 1 (250,930) (3) 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (9,820) - 7,305 - Total components of other comprehensive income that will not be reclassified to profit or loss 179,158 2 (255,523) (3) 8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements (46,008) (1) (8,752) - 8370 Share of other comprehensive income of associates accounted for using equity method (395) - 440 - 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss - - - - Total components of other comprehensive income that will be reclassified to profit or loss (46,403) (1) (8,312) - 8300 Other comprehensive income (after tax) 132,755 1 (263,835) (3) 8500 Total comprehensive income $ 481,992 5 144,085 1 Profit attributable to: 8610 Owners of parent $ 362,447 4 401,983 4 8620 Non-controlling interests (13,210) - 5,937 - $ 349,237 4 407,920 4 Comprehensive income attributable to: 8710 Owners of parent $ 496,877 5 138,502 1 8720 Non-controlling interests (14,885) - 5,583 - $ 481,992 5 144,085 1 9750 Basic earnings per share (note 6(s)) (expressed in New Taiwan dollars) $ 0.66 0.73 9850 Diluted earnings per share (note 6(s)) (expressed in New Taiwan dollars) $ 0.66 0.73

See accompanying notes to consolidated financial statements. 84 (English Translation of Consolidated Financial Statements Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the years ended December 31, 2019 and 2018 (Expressed in Thousands of New Taiwan Dollars)

Equity attributable to owners of parent Retained earnings Other equity Unrealized gains (losses) from Exchange financial assets differences on measured at fair Unrealized gains Total equity translation of value through other (losses) on attributable Non- Common Capital Legal Special Unappropriated foreign financial comprehensive available-for-sale to owners of controlling shares surplus reserve reserve retained earnings Total statements income financial assets Total parent interests Total equity Balance on January 1, 2018 $ 5,477,522 473,558 961,788 43,346 668,818 1,673,952 (57,203) - 156,257 99,054 7,724,086 312,692 8,036,778 Effects of retrospective application ------166,684 (156,257) 10,427 10,427 - 10,427 Balance on January 1, 2018 after adjustments 5,477,522 473,558 961,788 43,346 668,818 1,673,952 (57,203) 166,684 - 109,481 7,734,513 312,692 8,047,205 Net income - - - - 401,983 401,983 - - - - 401,983 5,937 407,920 Other comprehensive income - - - - (4,600) (4,600) (11,217) (247,664) - (258,881) (263,481) (354) (263,835) Total comprehensive income - - - - 397,383 397,383 (11,217) (247,664) - (258,881) 138,502 5,583 144,085

85 Appropriation and distribution of retained earnings: Legal reserve - - 36,614 - (36,614) ------Cash dividends - - - - (273,876) (273,876) - - - - (273,876) (4,218) (278,094) Disposal of investments in equity instruments designated at fair value through other comprehensive income - - - - 367 367 - (367) - (367) - - - Balance on December 31, 2018 5,477,522 473,558 998,402 43,346 756,078 1,797,826 (68,420) (81,347) - (149,767) 7,599,139 314,057 7,913,196 Net income - - - - 362,447 362,447 - - - - 362,447 (13,210) 349,237 Other comprehensive income - - - - 39,209 39,209 (43,634) 138,855 - 95,221 134,430 (1,675) 132,755 Total comprehensive income - - - - 401,656 401,656 (43,634) 138,855 - 95,221 496,877 (14,885) 481,992 Appropriation and distribution of retained earnings: Legal reserve - - 40,198 - (40,198) ------Special reserve - - - 106,421 (106,421) ------Cash dividends - - - - (273,876) (273,876) - - - - (273,876) (7,753) (281,629) Changes in non-controlling interests ------24,160 24,160 Donation from shareholders - 1,000 ------1,000 - 1,000 Disposal of investments in equity instruments designated at fair value through other comprehensive income - - - - (24,108) (24,108) - 24,108 - 24,108 - - - Balance on December 31, 2019 $ 5,477,522 474,558 1,038,600 149,767 713,131 1,901,498 (112,054) 81,616 - (30,438) 7,823,140 315,579 8,138,719

See accompanying notes to consolidated financial statements. (English Translation of Consolidated Financial Statements Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows For the years ended December 31, 2019 and 2018 (Expressed in Thousands of New Taiwan Dollars)

2019 2018 Cash flows from operating activities: Income before income tax $ 456,070 519,544 Adjustments: Adjustments to reconcile profit: Depreciation expense 679,270 625,014 Amortization expense 20,080 15,056 Expected credit loss 7,035 18,513 Net gains on financial assets at fair value through profit and loss (98) (70) Interest expense 96,284 90,824 Interest income (4,363) (4,865) Dividend income (54,219) (43,774) Share of losses (gains) of associates accounted for using equity method (1,980) 7,311 Gains on disposal of property, plant and equipment 1,726 (250) Other (521) - Total adjustments to reconcile profit 743,214 707,759 Changes in operating assets and liabilities: Changes in operating assets: Notes receivable 93,546 (59,130) Accounts receivable and overdue receivable (under other non-current financial assets) 13,518 43,196 Inventories 249,955 (382,439) Other current financial assets 8,312 (10,531) Other current assets 37,992 2,717 Total changes in operating assets 403,323 (406,187) Changes in operating liabilities: Notes payable (38,301) (48,017) Accounts payable (129,601) 47,299 Other payable (67,983) (22,711) Other current liabilities (7,141) 15,923 Net defined benefit liability (49,082) (50,502) Total changes in operating liabilities (292,108) (58,008) Total changes in operating assets and liabilities 111,215 (464,195) Total adjustments 854,429 243,564 Cash inflow generated from operations 1,310,499 763,108 Interest received 4,406 4,851 Dividends received 54,219 43,774 Income taxes paid (78,744) (63,978) Net cash flows from operating activities 1,290,380 747,755 Cash flows from investing activities: Acquisition of financial assets at fair value through profit or loss (30,000) (131,500) Proceeds from disposal of financial assets at fair value through profit or loss 13,632 118,014 Acquisition of financial assets at fair value through other comprehensive income - (149,800) Proceeds from disposal of financial assets at fair value through other comprehensive income 73,457 1,602 Acquisition of property, plant and equipment (343,401) (611,435) Proceeds from disposal of property, plant and equipment 12,488 2,441 Acquisition of intangible assets (11,297) (26,696) Decrease (increase) in other non-current financial assets (1,527) 816 Decrease in other non-current assets 3,818 (3,265) Increase in prepayments for equipment (96,306) 30,677 Net cash outflows from losing control of subsidiary (1,548) - Net cash inflows from business combination 16,952 - Net cash flows used in investing activities (363,732) (769,146) Cash flows used in financing activities: Increase in short-term borrowings 8,597,082 7,801,071 Decrease in short-term borrowings (8,683,483) (7,268,236) Proceeds from long-term borrowings 150,000 150,000 Repayments of long-term borrowings (415,000) (400,000) Payment of lease liabilities (34,257) - Cash dividends paid (273,876) (273,876) Donation from shareholders 1,000 - Interest paid (104,363) (97,870) Subsidiaries distributed cash dividends to non-controlling interests - (4,218) Increase in non-controlling interests - (354) Net cash used in financing activities (762,897) (93,483) Effect of exchange rate changes on cash and cash equivalents (23,488) 6,282 Net increase (decrease) in cash and cash equivalents 140,263 (108,592) Cash and cash equivalents at beginning of period 838,593 947,185 Cash and cash equivalents at end of period $ 978,856 838,593

See accompanying notes to consolidated financial statements. 86 (English Translation of Consolidated Financial Statements Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements For the years ended December 31, 2019 and 2018 (Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

Everlight Chemical Industrial Corporation (the “Company”) was incorporated on September 7, 1972 as a Company limited by shares and registered in accordance with the ROC Company Act. Everlight Chemical Industrial Corporation and subsidiaries (“ the Group” ) engage in manufacturing and selling of dye, UV absorber, specialty chemicals, toners, electronic chemicals, pharmaceutical product and material, chemical intermediary photoresistance, and etc.

(2) Approval date and procedures of the consolidated financial statements:

These consolidated financial statements were authorized for issuance by the board of directors on March 19, 2020.

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

Effective date New, Revised or Amended Standards and Interpretations per IASB IFRS 16 “Leases” January 1, 2019 IFRIC 23 “Uncertainty over Income Tax Treatments” January 1, 2019 Amendments to IFRS 9 “Prepayment features with negative compensation” January 1, 2019 Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” January 1, 2019 Amendments to IAS 28 “Long-term interests in associates and joint ventures” January 1, 2019 Annual Improvements to IFRS Standards 2015–2017 Cycle January 1, 2019

Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

IFRS 16 replaces the existing leases guidance, including IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, SIC-15 “Operating Leases – Incentives” and SIC-27 “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”.

(Continued)

87 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group applied IFRS 16 using the modified retrospective approach. The details of the changes in accounting policies are disclosed below:

(i) Definition of a lease

Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease, as explained in Note 4(l).

On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

(ii) As a lessee

As a lessee, the Group previously classified leases as operating leases or finance leases based on its assessment of whether the lease transferred significantly all the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the Group recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on- balance sheet.

The Group decided to apply recognition exemptions to short-term leases of office equipment and leases of transportation equipment.

The Group previously classified leases as operating leases under IAS 17 at transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’ s incremental borrowing rate as at January 1, 2019. The amount of right-of-use assets are determined by the lease liabilities and adjusted by the prepaid rental.

In addition, the Group used the following practical expedients when applying IFRS 16 to leases.

 Applied a single discount rate to a portfolio of leases with similar characteristics.

 Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

 Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

 Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

(Continued)

88 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Impacts on financial statements

On transition to IFRS 16, the Group recognised $356,365 thousand of right-of-use assets and $333,450 thousands of lease liabilities, recognising the difference from long-term prepaid rents. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 2.39%.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application, and lease liabilities recognized in the statement of financial position at the date of initial application disclosed as follows:

January 1, 2019 Operating lease commitment at December 31, 2018 as disclosed in the Group’s consolidated financial statements $ 123,419 Recognition exemption for: Short-term leases and leases of low-value assets (2,891) Interest expense from discounting (24,270) Extension and termination options reasonably certain to be exercised 237,192 Lease liabilities recognized at January 1, 2019 $ 333,450

(b) The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020 in accordance with Ruling No. 1080323028 issued by the FSC on July 29, 2019:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendments to IFRS 3 “Definition of a Business” January 1, 2020 Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform” January 1, 2020 Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020

The Group assesses that the adoption of the abovementioned standards would not have any material impact on its consolidated financial statements.

(Continued)

89 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between Effective date to an Investor and Its Associate or Joint Venture” be determined by IASB IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” January 1, 2022

The Group is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Group completes its evaluation.

(4) Summary of significant accounting policies:

The significant accounting policies presented in the consolidated financial statements are summarized below. Except Note 3 and Note 4(l) for those indicated accounting changes, the following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements.

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations” ) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations endorsed by the Financial Supervisory Commission, ROC.

(b) Basis of preparation

(i) Basis of measurement

Except for the following significant accounts, the consolidated financial statements have been prepared on a historical cost basis:

1) Financial assets at fair value through profit or loss are measured at fair value;

2) Fair value through other comprehensive income are measured at fair value; and

3) The defined benefit liabilities are measured at fair value of the plan assets less the present value of the defined benefit obligation, limited as explained in Note 4(o).

(Continued)

90 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Functional and presentation currency

The functional currency is determined based on the primary economic environment in which the entity operates. The consolidated financial statements are presented in New Taiwan dollars, which is the Group’s functional currency. All financial information presented in New Taiwan dollars has been rounded to the nearest thousand.

(c) Basis of consolidation

(i) Principles of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and subsidiaries. Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Intragroup balances and transactions, and any unrealized income and expenses arising from Intragroup transactions are eliminated in preparing the consolidated financial statements. The Group attributes the profit or loss and each component of other comprehensive income to the owners of the parent and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

The Group prepares consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the non- controlling interests are adjusted and the fair value of the consideration paid or received will be recognized directly in equity, and the Group will attribute it to the owners of the parent.

When the Group loses control over a subsidiary, it derecognizes the assets (including any goodwill) and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any interest retained in the former subsidiary is measured at fair value when control is lost, with the resulting gain or loss being recognized in profit or loss. The Group recognizes as gain or loss in profit or loss the difference between (i) the fair value of the consideration received as well as any investment retained in the former subsidiary at its fair value at the date when control is lost ;and (ii) the assets (including any goodwill), liabilities of the subsidiary as well as any related non-controlling interests at their carrying amounts at the date when control is lost, as gain or loss in profit or loss. When the Group loses control of its subsidiary, it accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if it had directly disposed of the related assets or liabilities.

(Continued)

91 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) List of subsidiaries in the consolidated financial statements

Shareholding percentage December December Name of investor Name of subsidiary Principal activity 31, 2019 31, 2018 Note The Company (ECIC) EVERLIGHT USA, INC. (EVUS) Selling chemical product and 100.00 100.00 - related raw materials ECIC EVERLIGHT (HONG KONG) Selling chemical product and 100.00 100.00 - LIMITED (EVHK) related raw materials ECIC EVERLIGHT CHEMICALS Investing business 100.00 100.00 - (SINGAPORE) PTE LTD. (EVSG) ECIC EVERLIGHT EUROPE B.V. Selling chemical product and 100.00 100.00 - (EVEU) related raw materials ECIC TREND TONE IMAGING, INC. Manufacturing and selling toners 76.15 76.15 - (TTI) of laser printer, copier and fax machine ECIC ELITE FOREIGN TRADING Selling chemical product and 50.00 50.00 (note 1) INCORPORATION (ELITE) related raw materials ECIC DAILYCARE BIOMEDICAL Selling medical supplies and 91.26 91.26 - INC. (DCBM) providing service of biological technology EVSG ETHICAL INTERNATIONAL Selling chemical product and 100.00 100.00 - TRADING & WAREHOUSING related raw materials (SHANGHAI) CO., LTD. (ETSH) EVSG GUANGZHOU ETHICAL Selling chemical product and 100.00 100.00 - TRADING CO., LTD. (ETGZ) related raw materials EVSG SHANGHAI EVERLIGHT Selling chemical product and 100.00 100.00 - TRADING CO., LTD. (EVSH) related raw materials EVSG EVERLIGHT (SUZHOU) Manufacturing and selling color 100.00 100.00 - ADVANCED CHEMICALS chemicals, toners and electronic LTD. (EVSZ) high-tech chemical product EVSG ANDA SEMICONDUCTOR Selling electronic high-tech 56.25 56.25 - TECHNOLOGY (SUZHOU) chemical product CO., LTD. (ANDA) EVUS EVERLIGHT HONDUARS S.A. Selling chemical product and - 51.00 (note 2) de C.V. (EVHOSH) related raw materials ANDA SHANGHAI ANDA Selling electronic high-tech 100.00 100.00 - INTERNATIONAL TRADING chemical product CO., LTD. (ADSH) ECIC GREATLIGHT INVESTMENT Investing business 100.00 100.00 - COPRORATION (GLTP) GLTP KEYSTONE Research and development and --(note 3) PHARMACEUTICALS INC. manufacturing pharmaceuticals (KEYSTONE)

(note 1): The Company has the right to appoint more than half of members of board of directors and has control over the board of directors. The subsidiary is deemed to be consolidated.

(note 2): EVHOSA obtained the notice of the cancellation of its business registration from the government, and the related procedure has been completed.

(note 3): Despite the Company held the stock of KEYSTONE less than 50%, the Company obtained the substantial control of appointing operating policies at June 1, 2019, and therefore regarded KEYSTONE as subsidiary. Hence, its financial statement was combined into the consolidated financial statements since the day of acquisition control. GLTP lost the substantial control of appointing operating policies at December 1, 2019. Since the date the control ceased, the KEYSTONE was excluded from accompanying consolidate financial statements.

(iii) List of subsidiaries which are not included in the consolidated financial statement: None.

(Continued)

92 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(d) Foreign currency

(i) Foreign currency transaction

Transactions in foreign currencies are translated into the respective functional currencies at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

 Fair value through other comprehensive income equity investment

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non- controlling interests. When the Company disposes of only part of investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

(e) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

(ii) It is held primarily for the purpose of trading;

(iii) It is expected to be realized within twelve months after the reporting period; or

(iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

(Continued)

93 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

(i) It is expected to be settled in the normal operating cycle;

(ii) It is held primarily for the purpose of trading;

(iii) It is due to be settled within twelve months after the reporting period; or

(iv) The Group not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

(f) Cash and cash equivalents

Cash comprised of cash on hand and cash in bank. Cash equivalents are those short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits, which meet the above criteria and for the purpose of fulfilling short-term commitments instead of the purpose of investing activities or others, are categorized as cash equivalents.

(g) Financial instruments

Accounts receivable are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

T it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

(Continued)

94 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

T its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

2) Fair value through other comprehensive income (FVOCI )

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Group's right to receive payment is established.

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

4) Impairment of financial assets

The Group recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and accounts receivable, other receivable, refundable deposits and other financial assets).

The Group measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

T Cash in bank, other receivable, refundable deposits and other financial assets for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

(Continued)

95 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group's historical experience and informed credit assessment as well as forward-looking information.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

The Group holds time deposits for domestic financial institutions, it is considered to be low credit risk.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when the financial asset is more than 365 days past due or the borrower is unlikely to pay its credit obligations to the Company in full.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘ credit- impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

T significant financial difficulty of the borrower or issuer;

T a breach of contract such as a default or being more than 365 days past due;

T the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

(Continued)

96 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

T it is probable that the borrower will enter bankruptcy or other financial reorganization; or

T the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due.

5) Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

(ii) Financial liabilities

1) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

(Continued)

97 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2) Derecognition of financial liabilities

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

3) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(iii) Derivative financial instruments and hedge accounting

The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognized in profit or loss.

(h) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(i) Investment in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over their financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition, less any accumulated impairment losses.

(Continued)

98 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The consolidated financial statements include the Group's share of the profit or loss and other comprehensive income of equity-accounted investees, after adjustments to align their accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. The Group recognizes any changes, proportionately with the shareholding ratio under additional paid in capital, when an associate's equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual controlling power.

Unrealized profits resulting from transactions between the Group and an associate are eliminated to the extent of the Group's interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

When the Group's share of losses exceeds its interests in an associate, the carrying amount of the investment, including any long term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent the Group has an obligation or has made payments on behalf of the associate.

(j) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with the expenditure will flow to the Group.

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

1) buildings and construction 25~55 years

2) equipment 3~15 years

(Continued)

99 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(k) Intangible assets

(i) Other intangible assets

Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use.

The estimated useful lives for current and comparative periods are as follows:

1) REACH registration related expense 5 years

2) Others 3~5 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(l) Lease

Applicable from January 1, 2019

(i) Identifying a lease

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

(Continued)

100 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2) the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

3) the Group has the right to direct the use of the asset throughout the period of use only if either:

V the Group has the right to direct how and for what purpose the asset is used throughout the period of use; or

V the relevant decisions about how and for what purpose the asset is used are predetermined and:

 the Group has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or

 the Group designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and non- lease components as a single lease component.

(ii) As a leasee

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

 fixed payments, including in-substance fixed payments;

 variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

(Continued)

101 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

 payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

 there is a change in future lease payments arising from the change in an index or rate; or

 there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee; or

 there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Group accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Group presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases of office equipment and leases of transportation equipment that have a lease term of 12 months or less and leases of low-value assets.

Applicable before January 1, 2019

Leases in which the Group are classified as finance leases. There leases are operating leases and are not recognized in the Group's balance sheets. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease.

(m) Impairment of non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

(Continued)

102 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

(n) Revenue

(i) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer. The Group recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Group's main types of revenue are explained below.

1) Sale of goods

The Group recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over use the products, and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Group has a right to an amount of consideration that is unconditional.

2) Financing components

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

(o) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

(Continued)

103 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Defined benefit plans

The Group's net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(p) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years.

The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

(Continued)

104 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;

(ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

(iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if the following criteria are met:

(i) the Group has a legally enforceable right to set off current tax assets against current tax liabilities; and

(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

1) the same taxable entity; or

2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

(q) Business combinations

The Group accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of (i) the consideration transferred (which is generally measured at fair value) and (ii) the amount of non-controlling interest in the acquiree, both over the identifiable net assets acquired at the acquisition date. If the amount calculated above is a deficit balance, the Group recognized that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

All acquisition-related transaction costs are expensed as incurred, except for the issuance of debt or equity instruments.

(Continued)

105 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

For each business combination, the Group measures any non-controlling interests in the acquiree either at fair value or at the noncontrolling interest’ s proportionate share of the acquiree’ s identifiable net assets, if the non-controlling interests are present ownership interests and entitle their holders to a proportionate share of the Group’ s net assets in the event of liquidation. Other components of non-controlling interests are measured at their acquisition-date fair values, unless another measurement basis is required by the IFRSs endorsed by the FSC.

(r) Earnings per share

The Group discloses the Group's basic and diluted earnings per share attributable to common shareholders of the Group. Basic earnings per share are calculated as the profit attributable to common shareholders of the Group divided by the weighted-average number of common shares outstanding. Diluted earnings per share are calculated as the profit attributable to common shareholders of the Group divided by the weighted-average number of common shares outstanding after adjustment for the effects of all potentially dilutive common shares, such as employee compensation.

(s) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group's chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Each operating segment consists of standalone financial information.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the consolidated financial statements in conformity with the Regulations requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

There is no information about judgments made in applying accounting policies that have the significant effects on the amounts recognized in the consolidated financial statements.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

(Continued)

106 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill, the Group is required to make subjective judgments in determining the independent cash flows, useful lives, expected future income and expenses related to the specific asset groups considering of the nature of the industry. Any changes in these estimates based on changed economic conditions or business strategies and could result in significant impairment charges or reversal in future years. Please refer to Note 6(c) for further description of the key assumptions used to determine the recoverable amount.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

December 31, December 31, 2019 2018 Cash on hand $ 2,418 3,332 Cash in bank 917,374 752,469 Time deposits 59,064 82,792 Cash and cash equivalents $ 978,856 838,593

Please refer to Note 6(w) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Group.

(b) Financial assets and liabilities

(i) Financial assets at fair value through profit or loss:

December 31, December 31, 2019 2018 Financial assets mandatorily measured at fair value through profit or loss: Monetary market fund $ 30,023 13,556

(ii) Financial assets at fair value through other comprehensive income:

December 31, December 31, 2019 2018 Stocks listed on domestic and foreign markets $ 1,040,091 942,940 Domestic unlisted common shares 62,036 92,769 $ 1,102,127 1,035,709

The Group designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments that the Group intends to hold for long-term strategic purposes.

(Continued)

107 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

For the years ended December 31, 2019 and 2018, the Group has sold the partial of financial assets at fair value through other comprehensive income for strategic purposes. The shares sold had a fair value of $73,457 thousand and $1,602 thousand, respectively, and the Group realized a (loss) gain of $(24,108) thousand and $367 thousand, respectively, which is already included in other comprehensive income. The gain has been transferred to retained earnings.

(iii) For credit risk and market risk, please refer to Note 6(w).

(iv) As of December 31, 2019 and 2018, the aforementioned financial assets were not pledged.

(v) Derivative financial instruments—not hedge

The Group hold derivative financial instruments to hedge its foreign currency and interest rate exposures. However, the derivative financial instruments can’ t meet the criteria for hedge accounting. The Group recognized gain on forward exchange contracts and foreign currency options amounted to $6,489 thousand and 11,118 thousand in 2019 and 2018, respectively.

(c) Receivables

December 31, December 31, 2019 2018 Notes receivable $ 233,771 333,705 Accounts receivable 1,443,937 1,506,912 Overdue receivable (under other non-current financial assets) 46,414 59,895 Less: loss allowance (72,496) (96,594) $ 1,651,626 1,803,918

The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as the incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provisions were determined as follows:

December 31, 2019 Gross carrying Weighted-average Loss allowance amount loss rate provision Current $ 1,475,486 0.01%~0.73% 5,470 1 to 90 days past due 183,764 6.81%~19.36% 13,346 91 to 365 days past due 18,458 33.46%~100% 7,266 More than 365 days past due 46,414 100% 46,414 $ 1,724,122 72,496

(Continued)

108 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

December 31, 2018 Gross carrying Weighted-average Loss allowance amount loss rate provision Current $ 1,633,389 0.01%~0.74% 6,143 1 to 90 days past due 172,208 6.07%~20.20% 15,616 91 to 365 days past due 35,020 42.66% 14,940 More than 365 days past due 59,895 100% 59,895 $ 1,900,512 96,594

The movement in the allowance for receivables was as follows:

2019 2018 Balance on January 1 $ 96,594 117,731 Impairment losses recognized 7,035 18,513 Amounts written off (29,922) (39,600) Effect of movements in exchange rates (1,211) (50) Balance on December 31 $ 72,496 96,594

The aforementioned financial assets were not pledged.

(d) Inventories

December 31, December 31, 2019 2018 Raw materials $ 786,128 1,043,645 Supplies 18,296 20,545 Work in progress 709,057 698,252 Finished goods 1,907,798 1,878,919 Materials in transit 82,904 116,363 $ 3,504,183 3,757,724

Except cost of goods sold and inventories recognized as expenses, the remaining gain or losses which were recognized as operating cost or deduction of operating cost were as follows:

2019 2018 Losses on valuation of inventories $ 4,246 10,987 Losses on inventory count 2,434 3,589 Unallocated production overheads 212,863 206,377 Losses on obsolescence 10,075 11,296 Scrap income (1,712) (4,170) $ 227,906 228,079

(Continued)

109 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

For the years ended December 31, 2019 and 2018, the expense resulted from obtaining the certification of GMP for pharmaceuticals division was included in unallocated production overheads.

As of December 31, 2019 and 2018, the inventories were not pledged.

(e) Investments accounted for using equity method

(i) The components of investments accounted for using the equity method at the reporting date were as follows:

December 31, December 31, 2019 2018 Associates $ 126,934 135,803

(ii) Associates

Summary of financial information for by the individually insignificant investments in associates accounted for using the equity method were as follows. The aforementioned financial information was included in the consolidated financial statements of the Group.

December 31, December 31, 2019 2018 Carrying amount of individually insignificant associates $ 126,934 135,803 2019 2018 Attributable to the Group: Profit (loss) from continuing operations $ 1,980 (7,311) Other comprehensive income (395) 440 Total comprehensive income $ 1,585 (6,871)

(iii) Pledge

As of December 31, 2019 and 2018, the aforementioned investment accounted for using equity method were not pledged.

(f) Acquisition of subsidiary and losing control of subsidiary

(i) On June 1, 2019, the Group obtained the substantial control of KEYSTONE by appointing operating policies. Therefore, KEYSTONE have been consolidated into the consolidated financial statements.

(Continued)

110 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the acquisition date.

Cash and cash equivalents $ 16,952 Other current assets 31,311 Plant, property, and equipment (Note 6 (h)) 39,144 Prepayments for equipment 3,796 Other non-current financial assets 844 Other non-current assets 301 Notes payables (1,058) Other payables (4,664) Other current assets (165) Total identifiable net assets acquired $ 86,461

(iii) Losing control of subsidiary

The Group lost the substantial control of appointing operating policies over KEYSTONE on December 1, 2019. There was no profit or loss on the aforementioned transaction.

The following table summarizes the recognized amounts of assets and liabilities assumed on December 1, 2019.

Cash and cash equivalents $ 1,548 Other current assets 15,609 Plant, property, and equipment (Note6 (h)) 59,012 Other non-current assets 500 Short-term borrowing (14,500) Other payables (77) Other current liabilities (533) Total identifiable net assets acquired $ 61,559

(g) Material non-controlling interest of subsidiaries

The material non-controlling interests of subsidiaries were as follows:

Percentage of non-controlling interests December 31, December 31, Subsidiaries Main operation place 2019 2018 TTI Taiwan 23.85 % %23.85

(Continued)

111 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The following information of the aforementioned subsidiaries have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. Included in these information are the fair value adjustment made during the acquisition and relevant difference in accounting principles between the Group as at the acquisition date. Intra-group transactions were not eliminated in this information.

December 31, December 31, 2019 2018 Current assets $ 644,051 629,679 Non-current assets 986,336 846,528 Current liabilities (533,445) (538,618) Non-current liabilities (242,426) (93,829) Net assets $ 854,516 843,760 Non-controlling interest $ 203,769 201,204

2019 2018 Operating revenues $ 1,050,047 1,085,942 Net income 6,168 5,156 Other comprehensive income 4,588 (13,663) Total comprehensive income $ 10,756 (8,507) Profit, attributable to non-controlling interests $ 1,471 1,230 Comprehensive income, attributable to non-controlling interests 2,565 (3,259)

2019 2018 Net cash flows from operating activities $ 157,167 50,258 Net cash flows used in investing activities (17,301) (128,366) Net cash flows from (used in) financing activities (72,617) 45,708 Net increase (decrease) in cash and cash equivalents $ 67,249 (32,400) Cash dividend distributed to non-controlling interests $- 4,218

(h) Property, plant and equipment

The detail of movement of the property, plant and equipment for the Group were as follows:

Construction in progress and Buildings and equipment to be Land construction Equipment inspected Total Cost: Balance at January 1, 2019 $ 894,153 4,312,840 9,182,889 409,611 14,799,493 Additions - 20,333 150,021 146,252 316,606 Disposals - (2,855) (98,084) - (100,939) Reclassification(note) - 90,823 429,460 (372,596) 147,687 Effects of changes in consolidated entities - - (8,138) - (8,138) Effect of movements in exchange rates (90) (12,937) (28,926) (185) (42,138) Balance at December 31, 2019 $ 894,063 4,408,204 9,627,222 183,082 15,112,571 (Continued)

112 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Construction in progress and Buildings and equipment to be Land construction Equipment inspected Total Balance at January 1, 2018 $ 894,035 4,235,094 8,728,197 474,192 14,331,518 Additions - 18,588 152,103 248,041 418,732 Disposals - (170) (112,724) - (112,894) Reclassification(note) - 65,302 429,565 (312,479) 182,388 Effect of movements in exchange rates 118 (5,974) (14,252) (143) (20,251) Balance at December 31, 2018 $ 894,153 4,312,840 9,182,889 409,611 14,799,493 Accumulated depreciation and impairment: Balance at January 1, 2019 $ - 2,234,410 6,810,518 - 9,044,928 Depreciation - 170,387 470,934 - 641,321 Disposals - (2,855) (83,870) - (86,725) Effects of changes in consolidated entities - - 11,730 - 11,730 Effect of movements in exchange rates - (5,796) (20,624) - (26,420) Balance at December 31, 2019 $- 2,396,146 7,188,688 - 9,584,834 Balance at January 1, 2018 $ - 2,070,936 6,471,106 - 8,542,042 Depreciation - 165,775 459,239 - 625,014 Disposals - (166) (110,537) - (110,703) Effect of movements in exchange rates - (2,135) (9,290) - (11,425) Balance at December 31, 2018 $- 2,234,410 6,810,518 - 9,044,928 Carrying amounts: Balance at December 31, 2019 $ 894,063 2,012,058 2,438,534 183,082 5,527,737 Balance at January 1, 2018 $ 894,035 2,164,158 2,257,091 474,192 5,789,476 Balance at December 31, 2018 $ 894,153 2,078,430 2,372,371 409,611 5,754,565

(note): Prepayments for business facilities were reclassified as property, plant and equipment.

(i) For the years ended December 31, 2019 and 2018, the Group capitalized the interest expenses on construction in progress amounted to $6,407 thousand and $8,628 thousand respectively, and the monthly interest rate used for capitalization calculation were 0.13%~0.15% and 0.16%, respectively.

(ii) As of December 31, 2019 and 2018, the property, plant and equipment of the Group had not been pledged.

(i) Other current assets

December 31, December 31, 2019 2018 Prepayments $ 69,188 80,807 Offset against business tax payable and input taxes 32,925 43,034 Payment on behalf of others 9,157 6,653 Others 1,018 4,473 $ 112,288 134,967

(Continued)

113 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(j) Right-of-use assets

The information about leases of land, buildings and construction, and equipment for which the Group as a lessee is presented below:

Buildings and Land construction Equipment Total Cost: Balance at January 1, 2019 $ - - - - Effects of retrospective application for IFRS16 218,355 124,950 13,060 356,365 Acquisitions - 16,620 4,320 20,940 Disposals - (10,851) - (10,851) Effect of changes in foreign exchange rates (1,313) (3,071) (74) (4,458) Balance at December 31, 2019 $ 217,042 127,648 17,306 361,996 Accumulated depreciation: Balance at January 1, 2019 $ - - - - Depreciation 5,735 28,551 3,663 37,949 Disposals - (1,869) - (1,869) Effect of changes in foreign exchange rates (23) (1,573) (9) (1,605) Balance at December 31, 2019 $ 5,712 25,109 3,654 34,475 Carrying amount: Balance at December 31, 2019 $ 211,330 102,539 13,652 327,521

(k) Intangible assets

The movement in intangible assets were as followers:

REACH registration related expenses Others Total Cost Balance on January 1, 2019 $ 153,868 18,978 172,846 Additions 11,297 - 11,297 Effect of movement in exchange rate - (196) (196) Balance on December 31, 2019 $ 165,165 18,782 183,947 Balance on January 1, 2018 $ 137,520 8,670 146,190 Additions 16,348 10,348 26,696 Effect of movement in exchange rate - (40) (40) Balance on December 31, 2018 $ 153,868 18,978 172,846 Accumulated amortization: Balance on January 1, 2019 $ 34,064 7,512 41,576 Amortization 18,025 2,055 20,080 Effect of movement in exchange rate - (164) (164) Balance on December 31, 2019 $ 52,089 9,403 61,492

(Continued)

114 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

REACH registration related expenses Others Total Balance on January 1, 2018 $ 22,364 4,806 27,170 Amortization 11,700 2,745 14,445 Effect of movement in exchange rate - (39) (39) Balance on December 31, 2018 $ 34,064 7,512 41,576 Carrying amounts: Balance at December 31, 2019 $ 113,076 9,379 122,455 Balance at January 1, 2018 $ 115,156 3,864 119,020 Balance at December 31, 2018 $ 119,804 11,466 131,270

(i) Amortization expense

For the years ended December 31, 2019 and 2018, the amortization of intangible assets are included in the statement of comprehensive income as follows:

2019 2018 Operating costs $ 381 1,284 Operating expenses 19,699 13,161 $ 20,080 10,161

(ii) Pledge

As of December 31, 2019 and 2018, he intangible assets of the Group not pledged as collateral.

(l) Short-term borrowings

December 31, December 31, 2019 2018 Unsecured bank loans $ 2,403,358 2,569,426 Short-term notes and bills payable 69,963 19,977 Total $ 2,473,321 2,589,403 Unused credit lines (including short-term and long-term borrowings) $ 3,411,117 3,498,523 Range of interest rate 1.00%~5.15% 1.16%~5.22%

As of December 31, 2019 and 2018, the Group issued short-term notes and bills payable through Dah-Chung Bills Finance Corp. to obtain funds from the currency market.

(Continued)

115 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(m) Long-term borrowings

December 31, 2019 Currency Rate Maturity year Amount Unsecured syndicated bank loan NTD 1.7895% 2015.4~2020.4 $ 179,748 Unsecured bank loans NTD 1.33%~1.79% 2020.3~2022.6 1,280,000 Less: long-term borrowings, current portion (470,000) Total $ 989,748

December 31, 2018 Currency Rate Maturity year Amount Unsecured syndicated bank loan NTD 1.7895% 2015.4~2020.4 $ 498,988 Unsecured bank loans NTD 1.33%~1.75% 2019.2~2021.8 1,225,000 Less: long-term borrowings, current portion (185,000) Total $ 1,538,988

As of March 5, 2015, the Group entered into a five-year syndicated loan agreement with CTBC Bank and other six banks. The total credit line under this loan agreement is $1,800,000 and is due in five years when the first draw on the loan. The first draw on the loan must be within three months after the date of the contract signed. Every draw on the loan, the amount was restricted to exceed $50,000 and the portion of exceeding $50,000 or unused credit line shall be a multiple of $10,000.

The credit line will be diminished by seven period from the date, that lasted twenty-four months from first draw on the loan and thereafter every six months. The diminished periods and diminished percentage are as follows:

(i) Period 1 to period 3: 10%,

(ii) Period 4 and period 5: 15%,

(iii) Period 6 and period 7: 20%.

When the credit line is diminished, the Group had to redeem the loans if the loan outstanding amount is exceeding to the credit line.

The related financial covenants and restrictions for the syndicated loans mentioned above were as follows:

(i) Current ratio (current assets/current liabilities): shall not be lower than 120%.

(ii) Liability ratio (liabilities/tangible net assets value): shall not be higher than 100%.

(Continued)

116 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Interest coverage ratio (profit before tax + depreciation + amortization + interest expense) / (interest expense): shall not be lower than 4 time.

(iv) Tangible net assets value (equity minus intangible assets): shall not be lower than $6,000,000 thousand.

The aforementioned ratio and criteria shall be reviewed semi-annually from 2015 based on the year- end consolidated financial statements audited by certified public accountant, and the semi-annual consolidated financial statements reviewed by certified public accountant. The Group was in compliance with the above financial covenants and restrictions.

The Group had not pledged the assets as collateral for bank loans.

(n) Lease liabilities

The carrying amounts of lease liabilities were as follow:

December 31, 2019 Current $ 34,488 Non-current $ 274,557

For the maturity analysis, please refer to Note 6(w).

The amounts recognized in profit or loss were as follows: 2019 Interest on lease liabilities $ 7,612 Expenses relating to short-term leases $ 7,429

The amounts recognized in the statement of cash flows for the Group was as follows: 2019 Total cash outflow for leases $ 49,298

(v) Land, buildings and constructions, and equipment lease

As of December 31, 2019, the Group leases land, buildings and constructions, and equipment for its warehouses and office space. The leases of warehouses and office typically run for a period from 3 to 20 years. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

(vi) The Group leases office equipment whose lease periods are 1 to 3 years, are recognized as short-term or lower-price lease. The Group elected to apply practical expedients not recognizing relative right-of-use assets and lease liabilities.

(Continued)

117 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(o) Operating lease

Non-cancellable operating lease rentals payable were as follows:

December 31, 2018 Less than one year $ 37,529 Between one and five years 53,949 Over five years 31,941 $ 123,419

The Group leases a number of office, equipment, warehouse and factory facilities under operating leases. The leases typically run for a period of 1 to 5 years, with an option to renew the lease after that date.

For the year ended December 31, 2018, the rent expense amounted to $43,559 thousand, which was recorded as operating expenses.

(p) Employee benefits

(i) Defined benefit plans

Reconciliations of defined benefit obligation at present value and plan asset at fair value were as follows:

December 31, December 31, 2019 2018 Present value of the defined benefit obligations $ 882,465 909,407 Fair value of plan assets (714,686) (643,444) Net defined benefit liabilities $ 167,779 265,963

The Group makes defined benefit plan contributions to the pension fund account with Bank of Taiwan and Insurance account with Bank of Nan-Shan that provides pensions for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employees to received retirement benefits based on years of service and average monthly salary for the six months prior to retirement.

1) Composition of plan assets

The Group allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

(Continued)

118 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group's Bank of Taiwan labor pension reserve account balance and Insurance account with Bank of Nan-Shan amounted to $714,686 thousand as of December 31, 2019. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

For the years ended December 31, 2019 and 2018, the movement in present value of the defined benefit obligations for the Group were as follows:

2019 2018 Defined benefit obligations as of January 1 $ 909,407 879,453 Current service costs and interest cost 23,070 26,789 Net remeasurements of defined benefit liabilities: Actuarial losses (gains) arising from changes in financial assumptions (27,948) 27,247 Benefits paid by the plan (22,064) (24,082) Defined benefit obligations as of December 31 $ 882,465 909,407

3) Movements of defined benefit plan assets

For the years ended December 31, 2019 and 2018, the movement in the fair value of the plan assets were as follows:

2019 2018 Fair value of plan assets as of January 1 $ 643,444 574,885 Return on plan assets (excluding the interest 7,316 8,019 expense) Net remeasurements of the defined benefit assets: Actuarial gains (losses) arising from changes in financial assumptions 21,154 15,349 Contributions paid by employer 59,818 62,717 Benefits paid by the plan (17,046) (17,526) Fair value of plan assets as of December 31 $ 714,686 643,444

4) Expenses recognized in profit or loss

2019 2018 Current service costs $ 12,884 14,748 Net interest expense of net defined benefit liabilities 2,870 4,022 $ 15,754 18,770

(Continued)

119 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2019 2018 Operating costs $ 9,054 11,017 Operating expenses 6,700 7,753 $ 15,754 18,770

5) Remeasurement of net defined benefit liabilities (assets) recognized in other comprehensive income

The Group's re-measurement of the net defined benefit liabilities (assets) recognized in other comprehensive income for the years ended December 31, 2019 and 2018, were as follows:

2019 2018 Accumulated amount as of January 1 $ (176,117) (164,219) Recognized during the period 49,102 (11,898) Accumulated amount as of December 31 $ (127,015) (176,117)

6) Actuarial assumptions

At the reporting date, the principal actuarial assumptions were as follows:

December 31, December 31, 2019 2018 Discount rate 1.000%~1.125% 1.125%~1.375% Future salary increasing rate 1.200%~1.270% 1.270%~1.500%

The Group expects to make contributions of $27,012 thousand to the defined benefit plans in the next year starting from December 31, 2019.

The weighted-average lifetime of the defined benefits plans is 12.0515.22 years.

7) Sensitivity analysis

As of December 31, 2019 and 2018, if the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

The impact of defined benefit obligations Increased Decreased December 31, 2019 Discount rate decreased (increased) 0.25% $ 23,255 (17,853) Future salary increasing rate increased (decreased) 0.25% 17,353 (22,794)

December 31, 2018 Discount rate decreased (increased) 0.25% 25,525 (20,126) Future salary increasing rate increased (decreased) 0.25% 19,511 (24,988)

(Continued)

120 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Reasonable possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

The method and assumptions used on current sensitivity analysis is the same as those of the prior year.

(ii) Defined contribution plans

The Group allocates 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Group allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The Group's mainland China subsidiaries have a defined contribution plan. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentage of employees’ monthly salaries and wages. Other than the monthly contributions, the Group has no further obligations.

The pension costs incurred from the contributions amounted to $66,480 thousand and $66,261 thousand for the years ended December 31, 2019 and 2018, respectively.

(q) Income taxes

(i) Income tax expense (benefit)

The components of income tax expenses (benefit) for the years ended December 31, 2019 and 2018 were as follows:

2019 2018 Current tax expense (benefit) Current period $ 79,013 114,167 Adjustment for prior periods (7,400) (7,984) 71,613 106,183 Deferred tax expense (benefit) Origination and reversal of temporary differences 35,220 8,133 Adjustment in tax rate - (2,692) 35,220 5,441 Income tax expense $ 106,833 111,624

(Continued)

121 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The amount of income tax expenses (benefit) recognized in other comprehensive income for the years ended December 31, 2019 and 2018 were as follows:

2019 2018 Remeasurements of defined benefit plans $ (9,820) (7,305)

Reconciliation of income tax expense and profit before tax for 2019 and 2018 were as follows:

2019 2018 Profit excluding income tax $ 456,070 519,544 Income tax using the Company's domestic tax rate $ 91,214 103,909 Effect of tax rates in foreign jurisdiction 10,002 5,902 Adjustment in tax rate - (2,692) Gain on disposal of investment - (88) Dividend revenue (10,565) (8,479) Current-year losses for which no deferred tax assets was recognized 10,162 541 Change in unrecognized temporary difference (1,283) 8,120 Undistributed earnings additional tax 232 7,561 Other 7,071 (3,150) Total $ 106,833 111,624

(ii) Deferred tax assets and liabilities

1) Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following item:

December 31, December 31, 2019 2018 The carryforward of unused tax losses $ 158,438 147,820 Others 1,380 - $ 159,818 147,820

Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilized the benefits therefrom.

(Continued)

122 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

As at December 31, 2019, the information of the Group's unutilized business losses, for which no deferred tax assets were recognized, are as follow:

Unutilized Year of loss business loss Expiry date 2010 $ 9,024 2020 2011 7,462 2021 2012 9,353 2022 2013 8,986 2023 2014 15,986 2024 2015 14,077 2025 2016 17,667 2026 2017 27,417 2027 2018 28,492 2028 2019 19,974 2029 $ 158,438

2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for the years ended December 31, 2019 and 2018 were as follows:

Deferred tax assets:

Loss Allowance for allowance of valuation of Defined receivables inventories benefit plans Other Total Balance as of January 1, 2019 $ 16,629 6,099 60,579 36,415 119,722 Recognized in profit or loss (10,879) (2,260) (16,199) (4,607) (33,945) Recognized in other comprehensive income - - (9,820) - (9,820) Balance as of December 31, 2019 $ 5,750 3,839 34,560 31,808 75,957

Balance as of January 1, 2018 $ 13,300 6,105 52,658 31,926 103,989 Recognized in profit or loss 3,329 (6) 616 4,489 8,428 Recognized in other comprehensive income - - 7,305 - 7,305 Balance as of December 31, 2018 $ 16,629 6,099 60,579 36,415 119,722

(Continued)

123 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Deferred tax liabilities:

Unrealized investment Unrealized income under foreign equity method exchange gains Other Total Balance as of January 1, 2019 $ (67,008) (1,925) - (68,933) Recognized in profit or loss (1,091) (184) - (1,275) Balance as of December 31, 2019 $ (68,099) (2,109) - (70,208)

Balance as of January 1, 2018 $ (52,296) (2,265) (503) (55,064) Recognized in profit or loss (14,712) 340 503 (13,869) Balance as of December 31, 2018 $ (67,008) (1,925) - (68,933)

(iii) The Company's income tax return for the years through 2016 were assessed and approved by the tax authorities.

(r) Capital and other equity

(i) Common share

As of December 31, 2019 and 2018, the Company's authorized share capital consisted of 800,000 thousand shares of common share, with $10 dollars par value per share, of which 547,752 thousand shares, respectively, were issued and outstanding.

(ii) Capital surplus

The balance of capital surplus as of December 31, 2019 and 2018, were as follows:

December 31, December 31, 2019 2018 Cash subscription in excess of par value of shares $ 462,559 462,559 Treasury share transactions 10,999 10,999 Donation from shareholders 1,000 - $ 474,558 473,558

According to the ROC Group Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring paid-in capital in excess of par value should not exceed 10% of the total common stock outstanding.

(Continued)

124 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Retained earnings

In accordance with the article of incorporation, it stipulates that the Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance is to be appropriated as follows:

1) Legal reserve should be at 10%.

2) Special reserve should be appropriated (reversed) in accordance with related rules.

3) Remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders' meeting for approval.

In accordance with on the amendment to Company's article of incorporation, in order for the requirement of future investment and shareholders' interest, the dividend payment is not lower than 50% of net profit of current year deduct legal reserve and the payment of cash dividend should exceed 25% of total dividends.

1) Legal reserve

When a company incurs no loss, it may, pursuant to a resolution by a shareholders' meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

2) Special reserve

The Company adopted to exemptions of IFRS 1 First-time Adoption of International Financial Reporting Standards of first time adoption in accordance with the IFRSs approved by the FSC. Based on the exemptions, the Company increased retained earnings amounted to $132,824 thousand from reserve for revaluation increment and cumulative translation adjustments (gains). In accordance with Rule No. 1010012865 issued by the FSC on April 6, 2012, the Company shall reserve a special reserve amounted to $18,752 thousand, which is same as the increased amount at first time adoption of IFRSs. The Company shall reverse to distribute of earnings proportionately based on the prior special reserve when the related assets had been used, disposal or reclassified. As of December 31, 2019 and 2018, the special reserve is both amounted to $18,646 thousand.

According to the aforementioned ruling, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal to the current- period total net reduction of other shareholders' equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve to account for cumulative changes to other shareholders' equity, and does not qualify for earnings distribution. Amounts of subsequent reversals pertaining to the net reduction of other shareholders' equity shall qualify for additional distributions.

(Continued)

125 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iv) Distribution of earnings

Distribution of earnings for 2018 and 2017 have been approved by the general meeting of shareholders held on May 30, 2019 and June 6, 2018, respectively. The relevant dividend distributions to shareholders were as follows:

2018 2017 Amount Amount per share Amount per share Amount Dividends distributed to common shareholders: Cash $ 0.50 $ 273,876 0.50 273,876 On March 19, 2020, the Company's Board of Directors proposed to resolved to appropriate the 2019 earnings. These earnings will be appropriated as follows:

2019 Amount per share Amount Dividends distributed to common shareholders: Cash $ 0.30 $ 164,326

(v) Other equity (net of tax)

Unrealized gains (losses) Exchange differences from financial assets on translation of measured at fair value Non- foreign financial through other Controlling statements comprehensive income interest Total Balance at January 1, 2019 $ (68,420) (81,347) 2,282 (147,485) Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income - 138,855 1,021 139,876 Exchange differences on translation of foreign financial statements (43,239) - (2,769) (46,008) Exchange differences on associates accounted for using equity method (395) - - (395) Disposal of equity instruments designated at fair value through other comprehensive income - 24,108 - 24,108 Balance at December 31, 2019 $ (112,054) 81,616 534 (29,904)

(Continued)

126 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Unrealized gains (losses) from financial assets Exchange measured at fair Unrealized differences on value through gains (losses) translation of other on available- Non- foreign financial comprehensive for-sale Controlling statements income financial assets interest Total Balance at January 1, 2018 $ (57,203) - 156,257 2,643 101,697 Effects of retrospective application - 166,684 (156,257) - 10,427 Balance at January 1, 2018 after adjustments (57,203) 166,684 - 2,643 112,124 Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income - (247,664) - (3,266) (250,930) Disposal of investments in equity instruments designated at fair value through other comprehensive income - (367) - - (367) Exchange differences on translation of foreign financial statements (11,657) - - 2,905 (8,752) Exchange differences on associates accounted for using equity method 440 - - - 440 Balance at December 31, 2018 $ (68,420) (81,347) - 2,282 (147,485)

(s) Earning per share

The Group’s earnings per share were calculated as follows:

2019 2018 Basic earning per share Profit attributable to common shareholders of the Company $ 362,447 401,983 Weighted-average number of common shares $ 547,752 547,752 Basic earnings per share (express in New Taiwan dollar) $ 0.66 0.73

2019 2018 Diluted earning per share Profit attributable to common shareholders of the Company $ 362,447 401,983 Weighted-average number of common shares 547,752 547,752 Effect of employee compensation 1,917 1,952 Weighted-average number of common shares outstanding (diluted) 549,669 549,704 Diluted earnings per share (express in New Taiwan dollar) $ 0.66 0.73

(Continued)

127 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(t) Employees compensation and directors' remuneration

In accordance with the articles of incorporation, the Company should contribute 5% of the profit as employee compensation and a maximum of 2% as directors' remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The recipients may include the employees of the Company's affiliated companies who meet certain conditions.

For the years ended December 31, 2019 and 2018, the Company estimated its employee compensation amounting to $24,143 thousand and $26,554 thousand and directors' remuneration amounting to $9,658 thousand and $10,622 thousand and , respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees and directors of each period, multiplied by the percentage of remuneration to employees and directors as specified in the Company's articles. These remunerations were expensed under operating costs or operating expenses for each period. Related information would be available at the Market Observation Post System website. The amounts, as stated in the parent-company-only financial statements, are identical to those of the actual distributions for 2019 and 2018

(u) Revenue from contract with customers

(i) Disaggregation of revenue

2019 Color Specialty Electronic chemicals chemicals chemicals Toners Pharmaceuticals Other Total Primary geographical markets: Taiwan $ 472,004 254,807 715,240 40,716 7,303 4,556 1,494,626 America 321,379 418,956 - 220,435 23,275 - 984,045 Asia 3,061,226 865,122 249,995 889,084 41,841 - 5,107,268 Europe 645,390 516,115 - 337,928 77,351 - 1,576,784 Other 102,178 - - 27,659 39,516 - 169,353 $ 4,602,177 2,055,000 965,235 1,515,822 189,286 4,556 9,332,076 Major products: Chemicals $ 4,602,177 2,055,000 965,235 - - - 7,622,412 Toners - - - 1,515,822 - - 1,515,822 Other - - - - 189,286 4,556 193,842 $ 4,602,177 2,055,000 965,235 1,515,822 189,286 4,556 9,332,076

2018 Color Specialty Electronic chemicals chemicals chemicals Toners Pharmaceuticals Other Total Primary geographical markets: Taiwan $ 564,269 247,396 846,817 41,667 4,454 4,880 1,709,483 America 333,559 493,530 - 206,313 43,156 - 1,076,558 Asia 2,876,144 916,123 232,088 964,249 68,267 - 5,056,871 Europe 654,630 433,233 236 371,814 66,430 - 1,526,343 Other 95,209 70,572 - 43,677 42,306 - 251,764 $ 4,523,811 2,160,854 1,079,141 1,627,720 224,613 4,880 9,621,019

(Continued)

128 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2018 Color Specialty Electronic chemicals chemicals chemicals Toners Pharmaceuticals Other Total Major products: Chemicals $ 4,523,811 2,160,854 1,079,141 - - - 7,763,806 Toners - - - 1,627,720 - - 1,627,720 Other - - - - 224,613 4,880 229,493 $ 4,523,811 2,160,854 1,079,141 1,627,720 224,613 4,880 9,621,019

(ii) Contract balance

December 31, December 31, January 1, 2019 2018 2018 Receivables $ 1,724,122 1,900,512 1,925,345 Less: loss allowance (72,496) (96,594) (117,731) Total $ 1,651,626 1,803,918 1,807,614 For the detail on receivables and loss allowance, please refer to Note 6(c).

(v) Non-operating income and expenses

(i) Other income

2019 2018 Interest income $ 4,363 4,865 Dividend income 54,219 43,774 $ 58,582 48,639

(ii) Other gains and losses

2019 2018 Foreign exchange losses, net $ (451) (5,979) Net gains on financial assets at fair value through profit or loss 98 70 Gains(losses) on disposal of property, plant and equipment (1,726) 250 Subsidy revenue 10,620 4,921 Others 79,618 62,314 $ 88,159 61,576

(iii) Finance costs

2019 2018 Interest expense $ 96,284 90,824

(Continued)

129 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(w) Financial instruments

(i) Credit risk

1) Credit risk exposure

As of December 31, 2019 and 2018, the Group's exposure to credit risk and the maximum exposure were mainly from:

a) The carrying amount of financial assets recognized in the balance sheet; and

b) The amounts of liabilities as a result from the Group providing financial guarantees were $59,960 thousand and $61,430 thousand , respectively.

2) Concentration of credit risk

The Group has exposure to credit risk of individual counterparty or group of counterparties with similar credit characteristics. Those related parties of which having transactions with the Group are regarded as group of counterparties with similar credit characteristics. There was no concentration of credit risk.

3) Receivables and debt securities

For credit risk exposure of receivables, please refer Note 6(c).

Other financial assets at amortized cost includes other receivables and refundable deposits. There were no loss allowance provision for the year ended December 31, 2019 and 2018. All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses. (Regarding how the financial instruments are considered to have low credit risk, please refer to Note 4(g))

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, including estimated interest payable and excluding the impact of netting agreements.

Carrying Contractual within Over 5 amount cash flows 1 year 1~2 years 2~5 years years December 31, 2019 Non-derivative financial liabilities Short-term borrowings $ 2,473,321 2,476,739 2,476,739 - - - Notes payable 152,138 152,138 152,138 - - - Accounts payable 295,375 295,375 295,375 - - - Lease liabilities 309,045 387,974 41,091 48,986 64,669 233,228 Other payable 252,252 252,252 252,252 - - - Payables on equipment 11,902 11,902 11,902 - - - Long-term borrowings (including current portion) 1,459,748 1,488,574 474,236 410,116 604,222 - $ 4,953,781 5,064,954 3,703,733 459,102 668,891 233,228

(Continued)

130 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Carrying Contractual within Over 5 amount cash flows 1 year 1~2 years 2~5 years years December 31, 2018 Non-derivative financial liabilities Short-term borrowings $ 2,589,403 2,593,766 2,593,766 - - - Notes payable 190,752 190,752 190,752 - - - Accounts payable 438,743 438,743 438,743 - - - Other payable 335,864 335,864 335,864 - - - Payables on equipment 38,697 38,697 38,697 - - - Long-term borrowings (including current portion) 1,723,988 1,771,864 194,194 1,274,694 302,976 - $ 5,317,447 5,369,686 3,792,016 1,274,694 302,976 -

The Group does not expect the cash flows included in the maturity analysis to occur significantly earlier or at significantly different amounts.

(iii) Currency risk

1) Exposure to foreign currency risk

The Group's significant exposure to foreign currency risk was as follows:

December 31, 2019 December 31, 2018 Foreign Exchange Foreign Exchange currency rate TWD currency rate TWD Financial assets Monetary items USD $ 31,506 29.98 944,551 31,748 30.72 975,285 JPY 229,189 0.28 64,173 319,386 0.28 89,562 RMB 74,855 4.31 322,007 62,722 4.47 280,367 Non-monetary items JPY 423,000 0.28 116,748 200,900 0.28 55,890 Financial liabilities Monetary items USD 33,955 30.00 1,018,650 52,880 30.74 1,575,637 JPY 153,310 0.28 42,927 122,129 0.28 34,196 RMB 1,792 4.33 7,759 6,312 4.50 28,130

(Continued)

131 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2) Sensitivity analysis

The Group's exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, loans and borrowings, and accounts payable that are denominated in foreign currency. A strengthening (weakening) 1% of appreciation (depreciation) of the NTD against the USD, JPY and RMB for the years ended December 31, 2019 and 2018, would have changed the profit by $2,091 thousand and $1,542 thousand, respectively, and equity by $1,168 thousand and $559 thousand, respectively. The analysis is performed on the same basis for 2019 and 2018.

3) Foreign exchange gains and losses on monetary items

Since the Group has many kinds of functional currency, the information on foreign exchange gains (losses) on monetary items is disclosed by total amount. For the years ended December 31, 2019 and 2018, foreign exchange losses (including realized and unrealized portions) are exchange losses amounted to $451 thousand and $5,979 thousand, respectively.

(iv) Interest rate analysis

Please refer to the notes on liquidity risk management and interest rate exposure of the Group's financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of non- derivative financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is based on the assumption that the amount of assets outstanding at the reporting date was outstanding throughout the year. The rate of change is expresses as the interest rate increase or decreases by 1% when reporting to management internally, which also represents the Group management's assessment of the reasonably possible interest rate change.

If the interest rate had increased/decreased by 1%, the Group's profit would have changed by $31,465 thousand and $34,507 thousand, respectively, for the years ended December 31, 2019 and 2018, with all other variable factors that remain constant. This is mainly due to the Group's borrowing at floating rates.

(v) Other price risk

If the equity price changes, and if it is based on the same basis for both year and assumes that all other variables remain the same, the impact to other comprehensive income will be as follows:

2019 2018 Other Other Equity price at comprehensive comprehensive reporting day income after tax Net income income after tax Net income Increase 1% $ 11,021 - 10,357 - Decrease 1% $ (11,021) - (10,357) -

(Continued)

132 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(vi) Fair value of financial instruments

1) Categories and fair values of financial instruments

The fair value of financial assets and liabilities at fair value through profit and loss and financial assets at fair value through other comprehensive income is measured on a recurring basis. The carrying amount and fair value of the Group's financial assets and liabilities, including the information on fair value hierarchy were as follows, however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and for equity investments that has no quoted prices in the active markets and whose fair value cannot be reliably measured, disclosure of fair value information is not required:

December 31, 2019 Fair value Carrying amount Level 1 Level 2 Level 3 Total Financial assets mandatorily measured at fair value through profit or loss Monetary market fund $ 30,023 30,023 - - 30,023 Financial assets at fair value through other comprehensive income Stocks listed on domestic and foreign markets 1,040,091 1,040,091 - - 1,040,091 Domestic unlisted common shares 62,036 - - 62,036 62,036 Subtotal 1,102,127 1,040,091 - 62,036 1,102,127 Financial assets measured at amortized cost Cash and cash equivalents 978,856 - - - - Notes and accounts receivable 1,651,626 - - - - Other financial assets 29,223 - - - - Subtotal 2,659,705 - - - - Total $ 3,791,855 1,070,114 - 62,036 1,132,150 Financial liabilities at fair value through profit or loss Financial liabilities measured at amortized cost Bank loans 3,933,069 - - - - Notes and accounts payable 447,513 - - - - Lease liabilities 309,045 - - - - Other payable 252,252 - - - - Payables on equipment 11,902 - - - - Total $ 4,953,781 - - - -

(Continued)

133 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

December 31, 2018 Fair value Carrying amount Level 1 Level 2 Level 3 Total Financial assets mandatorily measured at fair value through profit or loss Monetary market fund $ 13,556 13,556 - - 13,556 Financial assets at fair value through other comprehensive income Stocks listed on domestic and foreign markets 942,940 942,940 - - 942,940 Domestic unlisted common shares 92,769 - - 92,769 92,769 Subtotal 1,035,709 942,940 - 92,769 1,035,709 Financial assets measured at amortized cost Cash and cash equivalents 838,593 - - - - Notes and accounts receivable 1,803,918 - - - - Other financial assets 33,793 - - - - Subtotal 2,676,304 - - - - Total $ 3,725,569 956,496 - 92,769 1,049,265 Financial liabilities measured at amortized cost Bank loans $ 4,313,391 - - - - Notes and accounts payable 629,495 - - - - Other payable 335,864 - - - - Payables on equipment 38,697 - - - - Total $ 5,317,447 - - - -

2) Valuation techniques for financial instruments measured at fair value

a) Non-derivative instruments

The fair value of financial instruments traded in an active market is based on the quoted market prices. The quotations, which is published by the main exchange center, is included in the fair value of the listed securities instruments in an active market with open bid.

A financial instrument is regarded as the quoted price in an active market if the quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency; and if those prices represent the actual and regularly occurring market transactions on an arm's length basis. Otherwise, the market is deemed to be inactive. Normally, a market is considered to be inactive as follows:

i) the bid-ask spread is increasing; or

ii) the bid-ask spread varies significantly; or

iii) there has been a significant decline in trading volume.

(Continued)

134 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

When the financial instrument of the Group is traded in an active market, its fair value is illustrated by the category and nature as follows:

 The fair value of stocks listed on domestic and foreign markets, which are the financial assets with standard terms and conditions and traded in an active market, are based on the market closing prices.

Except the aforementioned financial instruments, with active market the others' fair value is based on valuation techniques. Fair value, measured by using valuation technique that can be extrapolated from either similar financial instruments or discounted cash flow method or other valuation techniques, including models, is calculated based on available market data at the reporting data.

When the financial instrument of the Group is traded in an inactive market, its fair value is illustrated by the category and nature as follows:

 Unquoted equity instruments: the fair value of financial instruments transactions in an inactive market, which is valued by comparable method. The main hypothesis is referred from the quotations of comparable listed companies and earning multiplies of PBR proportion as basic, which is adjusted by the discount affections of equity securities lacking market liquidity.

b) Derivative financial instruments

Measurement of the fair value of derivative instruments is based on the valuation techniques generally accepted by market participants such as the discounted cash flow or option pricing models. Fair value of forward currency is usually determined by the forward currency exchange rate.

3) Transfers between Level 1 and Level 2

The Group didn't have any fair value transfer between levels for the years ended December 31, 2019 and 2018.

4) Reconciliation of Level 3 fair values

Fair value through other comprehensive income Unquoted equity instruments Balance on January 1, 2019 $ 92,769 Total gains or losses: Recognized in other comprehensive income (30,733) Balance on December 31, 2019 $ 62,036

(Continued)

135 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Fair value through other comprehensive income Unquoted equity instruments Balance on January 1, 2018 $ 89,200 Total gains or losses: Recognized in other comprehensive income 3,569 Balance on December 31, 2018 $ 92,769

The aforementioned total gains or losses were included “ unrealized gains (losses) on equity investment measured at fair value through other comprehensive income”, which related to holding assets on December 31, 2019 and 2018 were as follows:

2019 2018 Recognized in other comprehensive income $ (30,733) 3,569

5) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Group's financial instruments that use Level 3 inputs to measure fair value were “ financial assets measured at fair value through other comprehensive income – debt investments”.

Most of the Group's financial instruments that use level 3 inputs to measure fair value have multiple significant unobservable inputs. There is no correlation existence among the significant unobservable inputs of equity investments that have no active markets because they were independent of each other.

Quantified information of significant unobservable inputs was as follows:

Inter-relationship between significant unobservable inputs and fair value Item Valuation technique Significant unobservable inputs measurement Financial assets measured Comparable Listed  Price-Book Ratio (as of December 31,  The estimated fair value would at fair value through companies approach 2019 and 2018 increase if the multiplier was other comprehensive higher. income- equity were 3.57~4.03, 3.77, respectively) investments without an  Market liquidity discount rate (as of  The estimated fair value would active market December 31, 2019 and 2018 were all decrease if market liquidity 20%) discount rate was higher.

(Continued)

136 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

6) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

The Group's measurements of financial instruments' fair value were reasonable, only if using different variables leading different results. For the fair value measurements in level 3, if changing valuation variables, would have the following effects on other comprehensive income on December 31, 2019 and 2018:

Fair value variation on other comprehensive income Favorable Unfavorable Upwards or December December December December Inputs Downwards 31, 2019 31, 2018 31, 2019 31, 2018 Price-book ratio 5% 2,958 4,505 (2,958) (4,505) Market liquidity discount rate 5% 3,205 4,739 (3,205) (4,739)

The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input.

(x) Financial risk management

(i) Overview

The Group have exposures to the following risks from its financial instruments:

1) Credit risk

2) Liquidity risk

3) Market risk

Detailed information about exposure risk arising from the aforementioned risk and the Group's objective, policies and process for managing risks have been stated below. Further quantitative disclosures have been disclosed as notes to the consolidated financial statements.

(ii) Risk management framework

The Group's inter departmental management and committee, which consists of general manager and managers from all departments, including manufacturing, research and development, environment, health and safety, financial and audit, is responsible to hold a meeting regularly for monitoring the Group's risk management policies.

The executive and responsible departments of risk management are as follows:

1) Financial risk, liquidity risk, credit risk and legal risk: based on regulations, government policy and analysis of market change, financial division and legal division make the strategy to reflect, then execute the strategy. The internal auditor reviews the risks control and procedures for the aforementioned risks.

(Continued)

137 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2) Market risk: the Group's SBUs and functional division are responsible to make the strategy to identify risk based on regulation, government policy and analysis of market change, then execute the strategy. In order to manage the risk of market change dramatically, management with SBUs managers will establish a task force when it is necessary.

3) Operating strategy risk: in order to monitor the operating strategy in compliance with the Group's vision and meet the operating goals, general manager division with management of SBUs will evaluate the risk of operational policy through performance evaluation periodically.

The Group's Audit Committee oversees how management monitors counterparty with the Group's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group's Audit Committee is assisted in its oversight role by the internal auditor. The internal auditor undertakes both regular and exceptional reviews of risk management controls and the procedures, and the result of which are reported to the Audit Committee.

(iii) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to financial instruments fails to meet it contractual obligations that arises principally from the Group's accounts receivable and investments in securities.

1) Accounts receivable and other receivable

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. According to the credit policy, the Group analyze each new customer individually for their credit worthiness before granting the new customer standard payment terms. Credit lines are established for each customer and reviewed periodically.

The Group did not have any collateral or other enhancements to avoid credit risk of financial assets.

2) Investments

The credit risk exposure in the bank deposits, and equity instruments are measured and monitored by the Group's finance department. Since the Group's transactions resulted from the external parties with good credit standing highly rated financial institutions, publicly-traded stock companies and unlisted companies with good reputation, there are no incompliance issues and therefore no significant credit risk.

3) Guarantees

The Group's policy is to provide financial guarantees only to wholly owned subsidiaries.

(Continued)

138 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iv) Liquidity risk

The Group manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Group's management supervises the banking facilities and ensures compliance with the terms of loan agreements.

Loans and borrowings from the bank form an important source of liquidity for the Group. As of December 31, 2019 and 2018, the Group's unused credit line were amounted to $3,411,117 thousand and $3,498,523 thousand, respectively.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risk. All such transactions are carried out within the guidelines of derivative transaction management set by the board of directors and general meeting of shareholders and the related financial transactions are under oversight by internal auditor. The management of the Group's market risk are as follows:

1) Currency risk

The Group is exposed to currency risk on foreign currency assets and liabilities resulted from operating, financing and investing activities. The Group hedges the currency risk by derivatives. Most of the foreign exchange gains and losses arising from foreign currency assets and liabilities will be offset by the gains or losses on derivative instruments. The Group may reduce the currency risk through derivative instruments but do not avoid all of the currency influence resulted from foreign currency exchange.

The Group monitors the exposure of individual foreign currency assets and liabilities periodically. When necessary, the Group uses foreign currency options and forward exchange contracts to hedge above currency risk exposure. The duration of foreign currency options and forward exchange contracts are within one year and do not meet the criteria for hedge accounting.

2) Interest rate risk

The Group's exposure of interest rate risk is mainly from floating-rate loans. Any change in interest rates will cause influence in the effective interest rates of loans and thus cause the alternation of future cash flows. The Group enters into and designates interest rate swaps and other capital market financing as hedges of the variability in cash flows by continuing to review the interest rate variability in order to control the financial cost at the relatively low in market interest rate.

(Continued)

139 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

3) Other market price risk

The Group monitors the risk arising from its available-for-sale security instruments, which are held for monitoring cash flow requirements and unused capital. The management of the Group monitors the combination of equity securities in its investment portfolio based on cash flow requirements. Material investments within the portfolio are managed on an individual basis, and all buy-and-sell decisions are approved by the Board of Directors.

(y) Capital management

The Board's policy is to keep a strong capital base in order to maintain investor, creditor and market confidence, and to sustain future development of the business. Capital consists of ordinary shares, paid-in capital, retained earnings and non-controlling interest of the Company. The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.

December 31, December 31, 2019 2018 Total liability $ 5,484,643 5,944,830 Less: cash and cash equivalents 978,856 838,593 Net liability $ 4,505,787 5,106,237 Total equity $ 8,138,719 7,913,196 Debt-to-equity ratio %55 %65

There were no change in the Group's approach to capital management for the year ended December 31, 2019.

(z) Investing and financing activities not affecting current cash flow

Reconciliation of liabilities arising from financing activities were as follows:

Non-cash changes Foreign exchange Fair value December 31, January 1, 2019 Cash flows movement changes 2019 Short-term borrowings $ 2,589,403 (86,401) (29,681) - 2,473,321 Long-term borrowings 1,723,988 (265,000) - 760 1,459,748 Lease liabilities 333,450 (34,257) (820) 10,672 309,045 Total liabilities from financing activities $ 4,646,841 (385,658) (30,501) 11,432 4,242,114

Non-cash changes Foreign exchange Fair value December 31, January 1, 2018 Cash flows movement changes 2018 Short-term borrowings $ 2,063,876 532,835 (7,308) - 2,589,403 Long-term borrowings 1,973,228 (250,000) - 760 1,723,988 Total liabilities from financing activities $ 4,037,104 282,835 (7,308) 760 4,313,391

(Continued)

140 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(7) Related-party transactions:

(a) Names and relationship with related parties

The following is the entity that has had transactions with related party during the periods covered in the consolidated financial statements.

Name of related party Relationship with the Group Chung Hwa Chemical Industrial Works, Ltd. The entity's chairman is the director of the Company (CHCIW)

(b) Significant transactions with related parties

(i) Purchase

The amounts of significant purchases by the Group from related parties were as follows:

2019 2018 CHCIW $ 36,439 35,957

The prices, payment terms and other terms and conditions of purchase transactions with related parties were not materially different from those of the third-party vendors.

(ii) Payables to related parties

December 31, December 31, Account Name of related party 2019 2018 Notes and accounts payable CHCIW $ 11,829 11,270

(c) Key management personnel compensation

2019 2018 Short-term employee benefits $ 33,529 32,133 Post-employment benefits 904 834 $ 34,433 32,967 (8) Pledged assets: None.

(9) Commitments and contingencies:

(a) The Group's unrecognized contractual commitment are as follows:

December 31, December 31, 2019 2018 Acquisition of property, plant and equipment $ 106,770 344,814

(Continued)

141 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(b) The Group's outstanding standby letter of credit are as follows:

December 31, December 31, 2019 2018 Outstanding standby letter of credit $- 306

(10) Losses due to major disasters: None.

(11) Subsequent events: None.

(12) Other:

(a) A summary of employee benefits, depreciation, and amortization, by function, is as follows:

By function By item Operating Operating Operating Operating costs expenses Total costs expenses Total Employee benefits Salary 750,709 608,364 1,359,073 776,473 618,847 1,395,320 Labor and health insurance 71,813 58,893 130,706 71,264 58,755 130,019 Pension 45,092 37,142 82,234 47,215 37,816 85,031 Remuneration of directors - 18,717 18,717 - 19,740 19,740 Others 33,119 28,714 61,833 34,499 27,872 62,371 Depreciation 515,968 163,302 679,270 493,602 131,412 625,014 Amortization(note) 381 19,699 20,080 1,284 13,772 15,056

(Note) The amortization expenses included long-term prepaid rent, amounted to $611 thousand for the year ended December 31, 2018.

(Continued)

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ĩńŰůŵŪůŶŦťĪ EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(13) Segment information:

(a) General information

The reportable segments and its operating were as follows:

(i) Color chemicals: manufacturing textile dye, leather dye, inkjet dye, metal dye, paper dye, textile functional chemicals, digital textile printing ink, dye for DSSC, colors pigments and etc.

(ii) Specialty chemicals: manufacturing of weatherability HALS, plastic HALS, PU/TPU anti- yellowing materials and cosmetic sun-screening materials.

(iii) Pharmaceuticals: manufacturing of prostaglandin API, cardiovascular disease API and Parkinson disease API.

(iv) Electronic chemicals: manufacturing of industrial photoresist for IC, LCD, LED and TP, developers, slurry and functional surface nano coating.

(v) Toner: manufacturing and sale of toner for laser printer, copier and fax machine.

(b) Information about reportable segments and their measurement and reconciliations

Taxation, are managed on a group basis, and hence they are not able to be allocated to each reportable segment. The reportable amount is similar to that in the report used by the chief operating decision maker.

The operating segment accounting policies are similar to those described in Note 4 "summary of significant accounting policies". The Group uses operating segment profit or loss as the basis to determine resource allocation and make a performance evaluation. The Group treated intersegment sales and transfers as third-party transactions.

The Group’s operating segment information and reconciliation are as follow:

2019 Color Specialty Electronic Pharmaceuticals Reconciliation chemicals chemicals chemicals Toner (Note) Others and elimination Total Revenue from external customers $ 4,602,177 2,055,000 965,235 1,515,822 189,286 4,556 - 9,332,076 Intersegment revenue ------Interest revenue - - - - - 4,363 - 4,363 Total revenue $ 4,602,177 2,055,000 965,235 1,515,822 189,286 8,919 - 9,336,439

Interest expense $ 46,673 18,747 8,016 18,808 4,038 2 - 96,284

Depreciation and amortization 300,883 105,199 44,566 135,185 94,849 18,668 - 699,350

Losses on investment - - - - - 1,980 - 1,980

Reportable segment profit or loss $ 448,345 230,045 5,252 (41,160) (201,701) 15,289 - 456,070

(Continued)

148 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2018 Color Specialty Electronic Pharmaceuticals Reconciliation chemicals chemicals chemicals Toner (Note) Others and elimination Total Revenue from external customers $ 4,523,811 2,160,854 1,079,141 1,627,720 224,613 4,880 - 9,621,019 Intersegment revenue ------Interest revenue - - - - - 4,865 - 4,865 Total revenue $ 4,523,811 2,160,854 1,079,141 1,627,720 224,613 9,745 - 9,625,884 Interest expense $ 42,136 16,710 6,545 21,720 3,710 3 - 90,824 Depreciation and amortization 258,794 88,857 42,964 153,197 70,489 25,769 - 640,070 Losses on investment - - - - - 7,311 - 7,311 Reportable segment profit or loss $ 591,884 120,959 (31,666) (23,255) (150,742) 12,364 - 519,544

Note: The expense resulted from obtaining the certification of GMP for Pharmaceuticals division, please refer to Note 6(d).

(c) Information for the entity as a whole

(i) Product and service information: the information is disclosed in Note (14)(b), the Group's operating segment information and reconciliation.

(ii) Geographic information

In presenting information on the basis of geography, segment revenue is based on the geographical location of customers and segment assets are based on the geographical location of the assets.

Revenue from the external customers:

Area 2019 2018 Taiwan $ 1,494,626 1,628,737 Europe 1,576,784 1,630,932 China 5,107,268 4,719,855 America 984,045 1,011,877 Other 169,353 178,079 $ 9,332,076 9,621,019 Non-current assets

Area December 31, December 31, 2019 2018 Taiwan $ 5,499,609 5,481,623 Europe 10,446 4,353 China 480,208 540,729 America 21,882 15,749 $ 6,012,145 5,984,241 Non-current assets included property, plant and equipment, intangible assets and other assets, not including financial instruments, deferred tax assets, and rights arising from an contract (non-current).

(iii) Major customers

There is no revenue from the external customers greater than 10% of net revenue.

149 II.I. ividual Financial Report

KPMG 台北市11049信義路5段7號68樓(台北101大樓) Telephone 電話 + 886 (2) 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Fax 傳真 + 886 (2) 8101 6667 Xinyi Road, Taipei City 11049, Taiwan, (R.O.C.) Internet 網址 kpmg.com/tw

Independent Auditors' Report

To the Board of Directors of Everlight Chemical Industrial Corporation:

Opinion

We have audited the financial statements of Everlight Chemical Industrial Corporation(“the Company”), which comprise the balance sheets as of December 31, 2019 and 2018, the statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audit the of the financial statements as of and for the ended December 31, 2019 in accordance with Regulations Governing Auditing, the Ruling No. 1090360805 issued by the FSC and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Furthermore, we conducted our audit of the financial statements as of and for the year ended December 31, 2018 in accordance with the Regulations Governing Auditing, and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained, is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the year ended December 31, 2019. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

1. Revenue recognition

Please refer to Note 4(n) “ Revenue” for accounting policy and Note 6(s) for the disclosure of revenue recognition to the parent-company-only financial statements.

Description of key audit matters

The Company is a listed company in related to public interest, and the investors are highly expecting the financial performance, resulting in revenue recognition is one of the key judgmental areas of our audit.

150 How the matter was addressed in our audit

Our major audit procedures included testing of the design and implement of controls over sales and collection of receivable transactions; evaluate if there is any significant abnormal changes through performing trend analysis on top 10 customers by comparing the related changes or differences; assessing and testing if the management obtained sufficient external evidence showing that the good controls of ownership have been transferred to the customers, to support the timing of revenue recognition; evaluating the adequacy of revenue recognition by testing the sale transactions during the period before and after the balance sheet date.

2. Valuation of accounts receivable

Please refer to Note 4(f) “Financial Instruments” for accounting policy, Note 5 for accounting assumptions, judgments and estimation uncertainty of accounts receivable and Note 6(c) for the disclosure of the valuation of accounts receivable to the parent-company-only financial statements.

Description of key audit matters

Given the challenging economic climate, the risk of receivables recovery remains high, resulting in significant judgment being applied in the management's assessment of the recoverability of accounts receivable. Consequently, this is one of the key judgmental areas of our audit.

How the matter was addressed in our audit

Our major audit procedures included testing the adequacy of the formula of the calculation for expected loss rate; testing the adequacy of aging report by tracing to related vouchers; evaluating the appropriateness of loss allowance and expected credit loss by testing if the loss allowance was made by expected loss rate; assessing if the evaluation document of loss allowance for accounts receivable was compliance with the Company's accounting policy; evaluating the adequacy of the disclosure of loss allowance for accounts receivable prepared by management.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including the Audit committee) are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

151 As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on this financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

152 The engagement partners on the audit resulting in this independent auditors' report are Chia-Chien Tang and Ya- Ling Chen.

KPMG

Taipei, Taiwan (Republic of China) March 19, 2020

Notes to Readers The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

The independent auditors’ audit report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ audit report and financial statements, the Chinese version shall prevail.

153 (English Translation of Financial Statements and Report Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Balance Sheets December 31, 2019 and 2018 (expressed in thousands New Taiwan dollars)

December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Assets Amount % Amount % Liabilities and Equity Amount % Amount % Current assets: Current liabilities: 1100 Cash and cash equivalents (note 6(a)) $ 554,683 5 511,695 4 2100 Short-term borrowings (note 6(j)) $ 1,717,630 14 1,793,260 14 1110 Financial assets at fair value through profit or loss-current (note 6(b)) 30,023 - - - 2322 Long-term borrowings, current portion (note 6(k)) 430,000 4 140,000 1 1150 Notes receivable, net (notes 6(c) and (s)) 54,757 1 97,850 1 2151 Notes payable (note 7) 151,828 1 190,752 2 1170 Accounts receivable, net (notes 6(c) and (s)) 718,837 6 755,738 6 2170 Accounts payable (note 7) 203,515 2 348,899 3 1180 Accounts receivable due from related parties, net (notes 6(c), (s) and 7) 450,599 4 539,577 4 2209 Other payable (notes 6(r) and 7) 301,733 3 388,187 3 1210 Other receivables due from related parties, net (note 7) 39,872 - 5,980 - 2213 Payable on equipment 8,712 - 31,293 - 130X Inventories (note 6(d)) 2,443,983 20 2,650,802 22 2230 Current tax liabilities 57,438 1 70,143 1 1476 Other current financial assets 18,613 - 25,195 - 2280 Lease liabilities-current (note 6(l)) 10,181 - - - 1479 Other current assets (note 6(g)) 78,076 1 91,394 1 2399 Other current liabilities 41,608 - 41,536 - Total current assets 4,389,443 37 4,678,231 38 Total current liabilities 2,922,645 25 3,004,070 24 154 Non-current assets: Non-current liabilities: 1517 Financial assets at fair value through other comprehensive income-non- 2540 Long-term borrowings (note 6(k)) 949,748 8 1,458,988 12 current (notes 6(b) and (u)) 1,031,371 8 967,368 8 2570 Deferred tax liabilities (note 6(o)) 70,208 1 68,788 1 1550 Investments accounted for using equity method (note 6(e)) 1,881,566 16 1,926,939 15 2580 Lease liabilities non-current (note 6(l)) 36,939 - - - 1600 Property, plant and equipment (notes 6(f) and 9) 4,407,578 37 4,532,783 37 2640 Net defined benefit liability (note 6(n)) 154,797 1 252,279 2 1755 Right-of-use-assets (note 6(h)) 46,669 - - - Total non-current liabilities 1,211,692 10 1,780,055 15 1780 Intangible assets (note 6(i)) 113,779 1 120,734 1 Total liabilities 4,134,337 35 4,784,125 39 1840 Deferred tax assets (note 6(o)) 69,090 1 111,257 1 Equity (notes 6(b), (e), (n), (o), (p) and (u)): 1915 Prepayments for equipment 15,551 - 43,100 - 3100 Common shares 5,477,522 45 5,477,522 44 1980 Other non-current financial assets (note 6(c)) 2,430 - 2,852 - 3200 Capital surplus 474,558 4 473,558 4 Total non-current assets 7,568,034 63 7,705,033 62 3300 Retained earnings 1,901,498 16 1,797,826 14 3400 Other equity (30,438) - (149,767) (1) Total equity 7,823,140 65 7,599,139 61 Total assets $ 11,957,477 100 12,383,264 100 Total liabilities and equity $ 11,957,477 100 12,383,264 100

See accompanying notes to parent-company-only financial statements. (English Translation of Financial Statements and Report Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Statements of Comprehensive Income For the years ended December 31, 2019 and 2018 (expressed in thousands of New Taiwan dollars except for earnings per share)

2019 2018 Amount % Amount % 4000 Operating revenue (notes 6(s) and 7) $ 7,203,554 100 7,405,726 100 5000 Operating costs (notes 6(d), (f), (h), (i), (l), (m),(n), (r), 7 and 12) 5,801,125 81 5,899,062 80 5900 Gross profit from operations 1,402,429 19 1,506,664 20 5910 Less: Unrealized profit (loss) from sales 8,148 - (10,702) - 5950 Gross profit from operations 1,410,577 19 1,495,962 20 6000 Operating expenses (notes 6(c), (f), (h), (i), (l), (m), (n), (r), 7 and 12): 6100 Selling expenses 532,997 7 533,369 7 6200 Administrative expenses 163,405 2 165,201 2 6300 Research and development expenses 360,357 5 357,431 5 6450 Expected credit loss (gain) (480) - 12,514 - Total operating expenses 1,056,279 14 1,068,515 14 6900 Net operating income 354,298 5 427,447 6 7000 Non-operating income and expenses (notes 6(b), (e), (f), (l) and (t)): 7010 Other income 51,524 1 44,683 1 7020 Other gains and losses 77,105 1 66,812 1 7050 Finance costs (62,243) (1) (60,234) (1) 7060 Share of gains of associates accounted for using equity method 28,387 - 15,203 - Total non-operating income and expense 94,773 1 66,464 1 7990 Income before income tax 449,071 6 493,911 7 7950 Income tax expenses (note (o)) 86,624 1 91,928 1 Net income 362,447 5 401,983 6 8300 Other comprehensive income (notes 6(e), (n), (o), (p) and (u)): 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Gains (losses) on remeasurements of defined benefit plans 48,717 1 (11,557) - 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value 137,460 2 (231,112) (3) through other comprehensive income 8330 Share of other comprehensive income of subsidiaries, accounted for using equity method 1,630 - (16,527) (1) 8349 Income tax related to items that may not be reclassified to profit or loss (9,743) - 6,932 - Total components of other comprehensive income that will not be reclassified to profit or loss 178,064 3 (252,264) (4) 8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements (43,239) (1) (11,657) - 8380 Share of other comprehensive income of associates accounted for using equity method (395) - 440 - 8399 Income tax related to items that may be reclassified to profit or loss - - - - Total components of other comprehensive income that will be reclassified to profit or loss (43,634) (1) (11,217) - 8300 Other comprehensive income(after tax) 134,430 2 (263,481) (4) 8500 Total comprehensive income $ 496,877 7 138,502 2 9750 Basic earnings per share (note 6(q)) (expressed in New Taiwan dollars) $ 0.66 0.73 9850 Diluted earnings per share (note 6(q)) (expressed in New Taiwan dollars) $ 0.66 0.73

See accompanying notes to parent-company-only financial statements.

155 (English Translation of Financial Statements and Report Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Statements of Changes in Equity For the years ended December 31, 2019 and 2018 (expressed in thousands of New Taiwan dollars )

Other equity Retained earnings Unrealized gains Exchange (losses) on financial differences on assets measured at Unrealized gains translation of fair value through (losses) on Common Capital Legal Special Unappropriated foreign financial other comprehensive available-for-sale shares surplus reserve reserve retained earnings Total statements income financial assets Total Total equity Balance on January 1, 2018 $ 5,477,522 473,558 961,788 43,346 668,818 1,673,952 (57,203) - 156,257 99,054 7,724,086 Effects of retrospective application ------166,684 (156,257) 10,427 10,427 Balance on January 1, 2018 after adjustments 5,477,522 473,558 961,788 43,346 668,818 1,673,952 (57,203) 166,684 - 109,481 7,734,513 Net income - - - - 401,983 401,983 - - - - 401,983 Other comprehensive income - - - - (4,600) (4,600) (11,217) (247,664) - (258,881) (263,481) Total comprehensive income - - - - 397,383 397,383 (11,217) (247,664) - (258,881) 138,502 Appropriation and distribution of retained earnings:

156 Legal reserve - - 36,614 - (36,614) ------Cash dividends - - - - (273,876) (273,876) - - - - (273,876) Disposal of investments in equity instruments designated at fair value through other comprehensive income - - - - 367 367 - (367) - (367) - Balance on December 31, 2018 5,477,522 473,558 998,402 43,346 756,078 1,797,826 (68,420) (81,347) - (149,767) 7,599,139 Net income - - - - 362,447 362,447 - - - - 362,447 Other comprehensive income - - - - 39,209 39,209 (43,634) 138,855 - 95,221 134,430 Total comprehensive income - - - - 401,656 401,656 (43,634) 138,855 - 95,221 496,877 Appropriation and distribution of retained earnings: Legal reserve - - 40,198 - (40,198) ------Special reserve - - - 106,421 (106,421) ------Cash dividends on ordinary shares - - - - (273,876) (273,876) - - - - (273,876) Donation from shareholders - 1,000 ------1,000 Disposal of investments in equity instruments designated at fair value through other comprehensive income - - - - (24,108) (24,108) - 24,108 - 24,108 - Balance on December 31, 2019 $ 5,477,522 474,558 1,038,600 149,767 713,131 1,901,498 (112,054) 81,616 - (30,438) 7,823,140

See accompanying notes to parent-company-only financial statements. (English Translation of Financial Statements and Report Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Statements of Cash Flows For the years ended December 31, 2019 and 2018 (expressed in thousands of New Taiwan dollars )

2019 2018 Cash flows from operating activities: Income before income tax $ 449,071 493,911 Adjustments: Adjustments to reconcile profit: Depreciation expense 503,744 464,502 Amortization expense 18,252 12,035 Expected credit loss (gain) (480) 12,514 Net gains on financial assets at fair value through profit and loss (23) (14) Interest expense 62,243 60,234 Interest income (1,585) (1,979) Dividend income (49,939) (42,704) Share of gains of associates and accounted for using equity method (28,387) (15,203) Gains on disposal of property, plants and equipment (863) (562) Unrealized (realized) gross profit on sale to subsidiaries (8,148) 10,702 Total adjustments to reconcile profit (loss) 494,814 499,525 Changes in operating assets and liabilities: Changes in operating assets: Notes receivable 43,093 (14,629) Accounts receivable and overdue receivable (under other non-current financial assets) 37,383 43,108 Accounts receivable due from related parties 88,978 45,403 Other receivable due from related parties 1,290 (2,090) Inventories 206,819 (338,315) Other current financial assets 6,566 (11,218) Other current assets 14,078 (3,902) Total changes in operating assets 398,207 (281,643) Changes in operating liabilities: Notes payable (38,924) (45,884) Accounts payable (145,384) 53,235 Other payable (79,180) (12,199) Other current liabilities 71 10,687 Net defined benefit liabilities (48,765) (50,336) Total changes in operating liabilities (312,182) (44,497) Total changes in operating assets and liabilities 86,025 (326,140) Total adjustments 580,839 173,385 Cash inflow generated from operations 1,029,910 667,296 Interest received 1,601 1,965 Dividends received 54,662 81,722 Income taxes paid (65,137) (44,124) Net cash flows from operating activities 1,021,036 706,859 Cash flows used in investing activities: Acquisition of financial assets at fair value through profit or loss (30,000) (118,000) Proceeds from disposal of financial assets at fair value through profit or loss - 118,014 Acquisition of financial assets at fair value through other comprehensive income - (74,900) Proceeds from disposal of financial assets at fair value through other comprehensive income 73,457 1,602 Acquisition of property, plant and equipment (279,680) (536,361) Proceeds from disposal of property, plant and equipment 2,156 1,498 Acquisition of intangible assets (11,297) (16,650) Decrease in other non-current assets 422 - Decrease (increase) in prepayments for equipment (84,589) 30,570 Net cash flows used in investing activities (329,531) (594,227) Cash flows used in financing activities: Increase in short-term borrowings 6,587,473 5,982,062 Decrease in short-term borrowings (6,663,103) (5,563,649) Proceeds from long-term borrowings 150,000 150,000 Repayments of long-term borrowings (370,000) (350,000) Payment of lease liabilities (10,145) - Cash dividends paid (273,876) (273,876) Donation from shareholders 1,000 - Interest paid (69,866) (67,542) Net cash used in financing activities (648,517) (123,005) Net increase (decrease) in cash and cash equivalents 42,988 (10,373) Cash and cash equivalents at beginning of period 511,695 522,068 Cash and cash equivalents at end of period $ 554,683 511,695

See accompanying notes to parent-company-only financial statements.

157 (English Translation of Financial Statements and Report Originally Issued in Chinese) EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION AND ITS SUBSIDIARIES Notes to the Parent-Company-Only Financial Statements For the years ended December 31, 2019 and 2018 (expressed in thousands of New Taiwan dollars , unless otherwise specified)

(1) Company history

Everlight Chemical Industrial Corporation (the “Company”) was incorporated on September 7, 1972 as a Group limited by shares and registered in accordance with the ROC Company Act. The Company engages in manufacturing and selling of dye, UV absorber, specialty chemicals, electronic chemicals, pharmaceutical product and material, chemical intermediary photoresistance, and etc.

(2) Approval date and procedures of the financial statements:

These parent-company-only financial statements were authorized for issuance by the board of directors on March 19, 2020.

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

Effective date New, Revised or Amended Standards and Interpretations per IASB IFRS 16 “Leases” January 1, 2019 IFRIC 23 “Uncertainty over Income Tax Treatments” January 1, 2019 Amendments to IFRS 9 “Prepayment features with negative compensation” January 1, 2019 Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” January 1, 2019 Amendments to IAS 28 “Long-term interests in associates and joint ventures” January 1, 2019 Annual Improvements to IFRS Standards 2015–2017 Cycle January 1, 2019

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows:

(i) IFRS 16“Leases”

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

(Continued) 158 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

The Company applied IFRS 16 using the modified retrospective approach. The details of the changes in accounting policies are disclosed below:

1) Definition of a lease

Previously, the Company determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Company assesses whether a contract is or contains a lease based on the definition of a lease, as explained in Note 4(l).

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Company applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

2) As a lessee

As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Company. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

The Company decided to apply recognition exemptions to short-term leases of office and transportation equipment.

The Company previously classified leases as operating leases under IAS 17 at transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company's incremental borrowing rate as at January 1, 2019. The amount of right-of-use assets are determined by the lease liabilities and adjusted by the prepaid rental :

In addition, the Company used the following practical expedients when applying IFRS 16 to leases.

 Applied a single discount rate to a portfolio of leases with similar characteristics.

 Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

 Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

 Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

(Continued) 159 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

3) Impacts on financial statements

On transition to IFRS 16, the Company recognised $55,463 thousands of right-of-use assets and $55,463 thousands of lease liabilities. When measuring lease liabilities, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 1.50%.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application, and lease liabilities recognized in the statement of financial position at the date of initial application disclosed as follows:

January 1, 2019 Operating lease commitment at December 31, 2018 as disclosed in $ 26,800 the Company's parent-company-only financial statements Recognition exemption for: short-term leases and lease of low-value assets (1,606) Interest expense from discounting (1,549) Extension and termination options reasonably certain to be exercised 31,818 Lease liabilities recognized at January 1, 2019 $ 55,463

(b) The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020 in accordance with Ruling No. 1080323028 issued by the FSC on July 29, 2019:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendments to IFRS 3 “Definition of a Business” January 1, 2020 Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform” January 1, 2020 Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020

The Company assesses that the adoption of the abovementioned standards would not have any material impact on its financial statements.

(Continued) 160 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between Effective date to an Investor and Its Associate or Joint Venture” be determined by IASB IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” January 1, 2022

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

(4) Summary of significant accounting policies:

The significant accounting policies presented in the parent-company-only financial statements are summarized below. The following accounting policies were applied consistently throughout the periods presented in the parent-company-only financial statements, except Note 3 and Note (l).

(a) Statement of compliance

These parent-company-only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations”).

(b) Basis of preparation

(i) Basis of measurement

Except for the following significant accounts, the parent-company-only financial statements have been prepared on a historical cost basis:

1) Financial assets at fair value through profit or loss are measured at fair value;

2) Fair value through other comprehensive income are measured at fair value; and

3) The defined benefit liabilities are measured at fair value of the plan assets less the present value of the defined benefit obligation, limited as explained in Note 4(o).

(ii) Functional and presentation currency

The functional currency is determined based on the primary economic environment in which the entity operates. The parent-company-only financial statements are presented in New Taiwan dollars, which is the Company's functional currency. All financial information presented in New Taiwan dollars has been rounded to the nearest thousand.

(Continued) 161 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(c) Foreign currencies

(i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

 Fair value through other comprehensive income equity investment.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non- controlling interests. When the Company disposes of only part of investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

(d) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

(ii) It is held primarily for the purpose of trading;

(iii) It is expected to be realized within twelve months after the reporting period; or

(Continued) 162 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

(i) It is expected to be settled in the normal operating cycle;

(ii) It is held primarily for the purpose of trading;

(iii) It is due to be settled within twelve months after the reporting period; or

(iv) The Company not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

(e) Cash and cash equivalents

Cash comprises cash on hand and cash in bank. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

(f) Financial instruments

Account receivables issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a account receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A account receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI)– equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

(Continued) 163 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

P it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

P its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

2) Fair value through other comprehensive income (FVOCI )

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Company's right to receive payment is established.

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

4) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and accounts receivable, other receivable, refundable deposits and other financial assets).

The Company measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

P Cash in bank, other receivable, refundable deposits and other financial assets for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

(Continued) 164 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

Loss allowance for account receivables and contract assets are always measured at an amount equal to lifetime ECL.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company's historical experience and informed credit assessment as well as forward looking information.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

The Company holds time deposits for domestic financial institutions, it is considered to be low credit risk.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 365 days past due or the borrower is unlikely to pay its credit obligations to the Company in full.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘ credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

P significant financial difficulty of the borrower or issuer;

P a breach of contract such as a default or being more than 365 days past due;

(Continued) 165 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

P the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

P it is probable that the borrower will enter bankruptcy or other financial reorganization; or

P the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company's procedures for recovery of amounts due.

5) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Company enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

(ii) Financial liabilities

1) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

(Continued) 166 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

2) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

3) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(iii) Derivative financial instruments and hedge accounting

The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognized in profit or loss.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(Continued) 167 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(h) Investment in associates

Associates are those entities in which the Company has significant influence, but not control or joint control, over their financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition, less any accumulated impairment losses.

The parent-company-only financial statements include the Company's share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases. The Company recognizes any changes of its proportionate share in the investee within capital surplus, when an associate's equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual significant influence.

Gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of unrelated Company's interests in the associate.

When the Company's share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

(i) Investment in subsidiaries

When preparing the parent-company-only financial statements, investments in subsidiaries which are controlled by the Company, are accounted for using the equity method. Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Company's share of profit or loss and other comprehensive income of the subsidiary as well as the distribution received. The Company also recognized its share in the changes in the equity of subsidiaries.

Changes in a parent's ownership interest in a subsidiary that do not result in the loss of control are accounted for within equity.

(j) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(Continued) 168 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with the expenditure will flow to the Company.

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

1) buildings and construction 25~55 years

2) equipment 3~15 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(k) Intangible assets

(i) Other intangible assets

Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use.

The estimated useful lives for current and comparative periods are as follows:

1) REACH registration related expense 5 years

2) Others 3~5 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(Continued) 169 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(l) Lease

Applicable from January 1, 2019

(i) Identifying a lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

2) the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

3) the Company has the right to direct the use of the asset throughout the period of use only if either:

S the Company has the right to direct how and for what purpose the asset is used throughout the period of use; or

S the relevant decisions about how and for what purpose the asset is used are predetermined and:

 the Company has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or

 the Company designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Company has elected not to separate non-lease components and account for the lease and non- lease components as a single lease component.

(ii) As a leasee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

(Continued) 170 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

 fixed payments, including in-substance fixed payments;

 variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

 payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

 there is a change in future lease payments arising from the change in an index or rate; or

 there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee; or

 there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Company presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases of office equipment and leases of transportation equipment that have a lease term of 12 months or less and leases of low-value assets.

(Continued) 171 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

Applicable before January 1, 2019

Leases in which the Company are classified as finance leases. There leases are operating leases and are not recognized in the Company's balance sheets. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease.

(m) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

(n) Revenue

(i) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company's main types of revenue are explained below.

1) Sale of goods

The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over use the products, and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

(Continued) 172 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

2) Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(o) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

(ii) Defined benefit plans

The Company's net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(Continued) 173 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(p) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years.

The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

(i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;

(ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

(iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if the following criteria are met:

(i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and

(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

1) the same taxable entity; or

2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(Continued) 174 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

(q) Earnings per share

The Company discloses the Company's basic and diluted earnings per share attributable to common shareholders of the Company. Basic earnings per share are calculated as the profit attributable to common shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee compensation.

(r) Operating segments

The Company discloses its segment reporting in the consolidated financial statements. Therefore, the Company does not disclose segment information in the parent-company-only financial statements.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the parent-company-only financial statements in conformity with the Regulations requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

There is no information about judgments made in applying accounting policies that have the significant effects on the amounts recognized in the parent-company-only financial statements.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill, the Company is required to make subjective judgments in determining the independent cash flows, useful lives, expected future income and expenses related to the specific asset groups considering of the nature of the industry. Any changes in these estimates based on changed economic conditions or business strategies and could result in significant impairment charges or reversal in future years. Please refer to Note 6(c) for further description of the key assumptions used to determine the recoverable amount.

(Continued) 175 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

December 31, December 31, 2019 2018 Cash on hand $ 1,632 2,058 Cash in bank 493,987 434,372 Time deposits 59,064 75,265 Cash and cash equivalents $ 554,683 511,695

Please refer to Note 6(u) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company.

(b) Financial assets

(i) Financial assets at fair value though profit and loss

December 31, December 31, 2019 2018 Financial assets mandatorily measured at fair value through profit and loss: Monetary market fund $ 30,023 -

(ii) Financial assets at fair value through other comprehensive income

December 31, December 31, 2019 2018 Stocks listed on domestic and foreign markets $ 974,607 881,736 Domestic unlisted common shares 56,764 85,632 $ 1,031,371 967,368

The Company designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments that the Company intends to hold for long-term for strategic purposes.

For the years ened December 31, 2019 and 2018, the Company has sold the partial of financial assets at fair value through other comprehensive income for strategic plan. The shares sold had a fair value of $73,457 thousand and $1,602 thousand, respectively, and the Company realized a (loss) gain of $(24,108) thousand and $367 thousand, respectively, which is already included in other comprehensive income. The gain has been transferred to retained earnings.

(iii) For credit risk and market risk, please refer to Note 6(u).

(iv) The aforementioned financial assets were not pledged.

(Continued) 176 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(v) Derivative financial instrumentsnon-hedge

The Company hold derivative financial instruments to hedge its foreign currency and interest rate exposures. However, the derivative financial instruments can't meet the criteria for hedge accounting. The Company recognized gain on forward exchange contracts and foreign currency options amounted to $6,489 thousand and $11,118 thousand in 2019 and 2018, respectively.

(c) Receivables

December 31, December 31, 2019 2018 Notes receivable $ 54,757 97,850 Accounts receivable 731,305 769,684 Accounts receivable from related parties 450,599 539,577 Overdue receivable (under other non-current financial assets) 23,421 29,582 Less: loss allowance (35,889) (43,528) $ 1,224,193 1,393,165

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, account receivables have been grouped based on shared credit risk characteristics and the days past due, as well as the incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provisions were determined as follows: December 31, 2019 Gross carrying Weighted-average Loss allowance amount loss rate provision Current $ 1,159,460 0.01~0.11% 1,213 1 to 90 days past due 76,180 6.82%~26.63% 10,743 91 to 365 days past due 1,021 30.53%~100% 512 More than 365 days past due 23,421 100% 23,421 Total $ 1,260,082 35,889 December 31, 2018 Gross carrying Weighted-average Loss allowance amount loss rate provision Current $ 1,351,602 0.01%~0.12% 1,594 1 to 90 days past due 44,695 7.67%~29.99% 6,407 91 to 365 days past due 10,814 34.45%~100% 5,945 More than 365 days past due 29,582 100% 29,582 Total $ 1,436,693 43,528

(Continued) 177 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

The movement in the allowance for receivables were as follows:

2019 2018 Balance on January 1 $ 43,528 68,394 Impairment losses recognized, (reversed) (480) 12,514 Amounts written off (7,159) (37,380) Balance on December 31 $ 35,889 43,528

The aforementioned financial assets were not pledged.

(d) Inventories

December 31, December 31, 2019 2018 Raw materials $ 601,558 838,151 Supplies 10,475 13,009 Work in progress 431,788 402,605 Finished goods 1,356,426 1,338,350 Materials in transit 43,736 58,687 $ 2,443,983 2,650,802

Except cost of goods sold and inventories recognized as expenses, the remaining gain or losses which were recognized as operating cost or deduction of operating cost were as follows:

2019 2018 Gains on valuation of inventories $ (2,350) (318) Losses on obsolescence 10,075 9,872 Losses on inventory count 2,488 3,583 Unallocated production overheads 196,252 203,251 Scrap income (1,712) (4,003) $ 204,753 212,385

For the years ended December 31, 2019 and 2018, the expense resulted from obtaining the certification of GMP for pharmaceuticals division was included in unallocated production overheads.

As of December 31, 2019 and 2018, the inventories were not pledged.

(Continued) 178 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(e) Investments accounted for using equity method

(i) The components of investments accounted for using the equity method at the reporting date were as follows:

December 31, December 31, 2019 2018 Subsidiaries $ 1,825,894 1,872,943 Associates 55,672 53,996 $ 1,881,566 1,926,939

(ii) Subsidiaries

Please refer to consolidated financial statements for the year ended December 31, 2019 .

(iii) Associates

Summary of financial information for the individually insignificant investments in associates accounted for using the equity method were as follows. The aforementioned financial information was included in the parent-company-only financial statements of the Company.

December 31, December 31, 2019 2018 Carrying amount of individually insignificant associates $ 55,672 53,996

2019 2018 Attributable to the Company: Profit (loss) from continuing operations $ 2,071 (1,531) Other comprehensive income (395) 440 Total comprehensive income $ 1,676 (1,091)

(iv) The aforementioned investment accounted for using equity method were not pledged.

(f) Property, plant and equipment

The detail of movement of the property, plant and equipment for the Company were as follows:

Construction in Buildings progress and and equipment to be Land construction Equipment inspected Total Cost: Balance on of January 1, 2019 $ 890,375 3,175,461 7,436,883 403,631 11,906,350 Additions - 15,039 97,325 144,735 257,099 Disposals - - (42,205) - (42,205) Reclassification (note) - 87,493 394,674 (370,030) 112,137 Balance on of December 31, 2019 $ 890,375 3,277,993 7,886,677 178,336 12,233,381

(Continued) 179 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

Construction in Buildings progress and and equipment to be Land construction Equipment inspected Total Balance on of January 1, 2018 $ 890,375 3,126,993 6,977,764 446,413 11,441,545 Additions - 11,677 130,813 241,753 384,243 Disposals - (170) (63,545) - (63,715) Reclassification (note) - 36,961 391,851 (284,535) 144,277 Balance on of December 31, 2018 $ 890,375 3,175,461 7,436,883 403,631 11,906,350 Accumulated depreciation and impairment: Balance on of January 1, 2019 $ - 1,860,267 5,513,300 - 7,373,567 Depreciation - 131,077 362,071 - 493,148 Disposals - - (40,912) - (40,912) Balance on of December 31, 2019 $- 1,991,344 5,834,459 - 7,825,803 Balance on of January 1, 2018 $ - 1,732,908 5,238,936 - 6,971,844 Depreciation - 127,525 336,977 - 464,502 Disposals - (166) (62,613) - (62,779) Balance on of December 31, 2018 $- 1,860,267 5,513,300 - 7,373,567 Carrying amounts: Balance on of December 31, 2019 $ 890,375 1,286,649 2,052,218 178,336 4,407,578 Balance on of December 31, 2018 $ 890,375 1,315,194 1,923,583 403,631 4,532,783 Balance on of January 1, 2018 $ 890,375 1,394,085 1,738,828 446,413 4,469,701

(note): Prepayments for business facilities were reclassified as property, plant and equipment.

(i) For the years ended December 31, 2019 and 2018, the Company capitalized the interest expenses on construction in progress, amounted to $6,313 thousand and $8,235 thousand, respectively, and the monthly interest rate used for capitalization calculation were 0.15% and 0.16%, respectively.

(ii) As of December 31, 2019 and 2018, the property, plant and equipment of the Company had not been pledged.

(g) Other current assets

December 31, December 31, 2019 2018 Prepayments $ 48,209 50,812 Offset against business tax payable and input taxes 20,710 34,724 Payment on behalf of others 9,157 5,858 $ 78,076 91,394

(Continued) 180 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(h) Right-of-use assets

The information about lease of buildings and construction, and equipment for which the Company as a leasee is presented below:

Buildings and construction Equipment Total Cost: Balance at January 1, 2019 - - - Effects of retrospective application for IFRS16 43,320 12,143 55,463 Acquisitions - 1,802 1,802 Balance at December 31, 2019 43,320 13,945 57,265 Accumulated depreciation: Balance at January 1, 2019 - - - Depreciation 7,659 2,937 10,596 Balance at December 31, 2019 7,659 2,937 10,596 Carrying amount: Balance at December 31, 2019 35,661 11,008 46,669

(i) Intangible assets

The movement in intangible assets were as follows:

REACH registration related expenses Others Total Cost: Balance on of January 1, 2019 $ 153,868 2,267 156,135 Additions 11,297 - 11,297 Balance on of December 31, 2019 $ 165,165 2,267 167,432 Balance on of January 1, 2018 $ 137,520 1,965 139,485 Additions 16,348 302 16,650 Balance on of December 31, 2018 $ 153,868 2,267 156,135 Accumulated amortization: Balance on of January 1, 2019 $ 34,064 1,337 35,401 Amortization 18,026 226 18,252 Balance on of December 31, 2019 $ 52,090 1,563 53,653 Balance on of January 1, 2018 $ 22,364 1,002 23,366 Amortization 11,700 335 12,035 Balance on of December 31, 2018 $ 34,064 1,337 35,401 Carrying amounts: Balance on of December 31, 2019 $ 113,076 703 113,779 Balance on of December 31, 2018 $ 119,804 930 120,734 Balance on of January 1, 2018 $ 115,156 963 116,119

(Continued) 181 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(i) Amortization expense

For the years ended December 31, 2019 and 2018, the amortization of intangible assets are included in the statement of comprehensive income as follows:

2019 2018 Operating costs and expenses $ 18,252 12,035

(ii) Pledge

As of December 31, 2019 and 2018, the intangible assets of the Company were not pledged as collateral.

(j) Short-term borrowings

December 31, December 31, 2019 2018 Unsecured bank loans $ 1,717,630 1,793,260 Unused credit lines $ 2,484,334 2,173,130 Range of interest rate 1.00%~3.09% 1.16%~4.19%

(k) Long-term borrowings

December 31, 2019 Currency Rate Maturity year Amount Unsecured syndicated bank loan NTD 1.7895% 2015.4~2020.4 $ 179,748 Unsecured bank loans NTD 1.33%~1.45% 2020.3~2022.6 1,200,000 Less: long-term borrowings, current portion (430,000) Total $ 949,748

December 31, 2018 Currency Rate Maturity year Amount Unsecured syndicated bank loan NTD 1.7895% 2015.4~2020.4 $ 498,988 Unsecured bank loans NTD 1.33%~1.45% 2020.3~2021.6 1,100,000 Less: long-term borrowings, current portion (140,000) Total $ 1,458,988

As of March 5, 2015, the Company entered into a five-year syndicated loan agreement with CTBC Bank and other six banks. The total credit line under this loan agreement is $1,800,000 thousand and is due in five years when the first draw on the loan. The first draw on the loan must be within three months after the date of the contract signed. Every draw on the loan, the amount was restricted to exceed $50,000 thousand and the portion of exceeding $50,000 thousand or unused credit line shall be a multiple of $10,000 thousand.

(Continued) 182 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

The credit line will be diminished by seven period from the date, that lasted twenty-four months from first draw on the loan and thereafter every six months. The diminished periods and diminished percentage are as follows;

(i) Period 1 to period 3: 10%,

(ii) Period 4 and period 5: 15%,

(iii) Period 6 and period 7: 20%.

When the credit line is diminished, the Company had to redeem the loans if the loan outstanding amount is exceeding to the credit line.

The related financial covenants and restrictions for the syndicated loans mentioned above were as follows:

(i) Current ratio (current assets/current liabilities): shall not be lower than 120%.

(ii) Liability ratio (liabilities/tangible net assets value): shall not be higher than 100%.

(iii) Interest coverage ratio (profit before tax + depreciation + amortization + interest expense) / (interest expense): shall not be lower than 4 times.

(iv) Tangible net assets value (equity minus intangible assets): shall not be lower than $6,000,000 thousand.

The aforementioned ratio and criteria shall be reviewed semi-annually from 2015 based on the year- end consolidated financial statements audited by certified public accountant, and the semi-annual consolidated financial statements reviewed by certified public accountant. The Company was in compliance with the above financial covenants and restrictions.

(l) Lease liabilities

The carry amount of lease liabilities were as follow:

December 31, 2019 Current $ 10,181 Non-current $ 36,939

For the maturity analysis, please refer to Note 6(u).

The amounts recognized in profit or loss were as follows:

2019 Interest on lease liabilities $ 767 Expenses relating to short-term leases $ 1,662

(Continued) 183 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

The amounts recognized in the statement of cash flows for the Company was as follows:

2019 Total cash outflow for leases $ 12,574

(v) Land, buildings and constructions, and equipment lease

As of December 31, 2019, the Company leases buildings and constructions, and equipment for its warehouses and office space. The leases of warehouses and office typically run for a period from 3 to 7 years. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

(vi) The Company leases office equipment whose lease periods are 1 to 3 years, are recognized as short-term or lower-price lease. The Company elected to apply practical expedients not recognizing relative right-of-use assets and lease liabilities.

(m) Operating lease

Non-cancellable operating lease rentals payable was as follows:

December 31, 2018 Less than one year $ 11,887 Between one and five years 14,913 $ 26,800

The Company leases a number of operating, equipment, warehouse and factory facilities under operating leases. The leases typically run for a period of 1 to 5 years, with an option to renew the lease after that date.

For the year ended Decembrr 31, 2018, the rent expense amounted to $11,305 thousand, which was recorded as operating expenses.

(n) Employee benefits

(i) Defined benefit plans

Reconciliations of defined benefit obligation at present value and plan asset at fair value are as follows:

December 31, December 31, 2019 2018 Present value of the defined benefit obligations $ 851,729 879,593 Fair value of plan assets (696,932) (627,314) Net defined benefit liabilities $ 154,797 252,279

(Continued) 184 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan and Nanshan life insurance nonforfeiture values that provides pensions for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employees to received retirement benefits based on years of service and average monthly salary for the six months prior to retirement.

1) Composition of plan assets

The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Company's Bank of Taiwan labor pension reserve account balance and Nan-shan life insurance nonforfeiture values amounted to $696,932 thousand as of December 31, 2019. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

For the years ended December 31, 2019 and 2018, the movement in present value of the defined benefit obligations for the Company were as follows:

2019 2018 Defined benefit obligations as of January 1 $ 879,593 847,061 Current service costs and interest cost 22,305 25,826 Net remeasurements of defined benefit liabilities: Actuarial losses (gains) arising from changes in financial assumptions (28,105) 26,407 Benefits paid by the plan (22,064) (19,701) Defined benefit obligations as of December 31 $ 851,729 879,593

(Continued) 185 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

3) Movements of defined benefit plan assets

For the years ended December 31, 2019 and 2018, the movement in the fair value of the plan assets were as follows:

2019 2018 Fair value of plan assets as of January 1 $ 627,314 556,002 Return on plan assets (excluding the interest expense) 7,103 7,723 Net remeasurements of the defined benefit assets: Actuarial gains (losses) arising from changes in financial assumptions 20,612 14,850 Contributions paid to the plan 58,949 61,884 Benefits paid by the plan (17,046) (13,145) Fair value of plan assets as of December 31 $ 696,932 627,314

4) Expenses recognized in profit or loss

2019 2018 Current service costs $ 12,521 14,301 Net interest expense of net defined benefit liabilities 2,681 3,802 $ 15,202 18,103

2019 2018 Operating costs $ 8,728 10,593 Administration expenses 4,339 5,066 Research and development expenses 2,135 2,444 $ 15,202 18,103

5) Remeasurement of net defined benefit liabilities (assets) recognized in other comprehensive income

The Company's remeasurement of the net defined benefit liabilities (assets) recognized in other comprehensive income for the years ended December 31, 2019 and 2018, were as follows:

2019 2018 Accumulated amount as of January 1 $ (165,587) (154,030) Recognized during the period 48,717 (11,557) Accumulated amount as of December 31 $ (116,870) (165,587)

(Continued) 186 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

6) Actuarial assumptions

The principal actuarial assumptions were as follows:

December 31, December 31, 2019 2018 Discount rate 1.000 % %1.125 Future salary increasing rate 1.200 % %1.500

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $26,143 thousand.

The weighted-average lifetime of the defined benefits plans is 12.05 years.

7) Sensitivity analysis

As of December 31, 2019 and 2018, if the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

The impact of defined benefit obligations Increased Decreased December 31, 2019 Discount rate decreased (increased) 0.25% $ 22,584 (17,215) Future salary increasing rate increased (decreased) 0.25% 16,695 (22,165) December 31, 2018 Discount rate decreased (increased) 0.25% 24,807 (19,439) Future salary increasing rate increased (decreased) 0.25% 18,805 (24,315) Reasonable possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets. The method and assumptions used on current sensitivity analysis is the same as those of the prior year.

(ii) Defined contribution plans

The Company allocates 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

(Continued) 187 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

The pension costs incurred from the contributions to the Bureau of Labor Insurance amounted to $37,299 thousand and $37,257 thousand for the years ended December 31, 2019 and 2018, respectively.

(o) Income taxes

(i) Income tax expense

The components of income tax expenses (benefit) for the years ended December 31, 2019 and 2018 were as follows:

2019 2018 Current tax expense (benefit) Current period $ 60,180 94,377 Adjustment for prior periods (7,400) (7,552) 52,780 86,825 Deferred tax expense (benefit) Origination and reversal of temporary differences 33,844 7,446 Adjustment in tax rate - (2,343) 33,844 5,103 Income tax expense $ 86,624 91,928

The amount of income tax expenses (benefit) recognized in other comprehensive income for the years ended December 31, 2019 and 2018 were as follows:

2019 2018 Remeasurements from defined benefit plans $ 9,743 (6,932)

Reconciliation of income tax expense and profit before tax for 2019 and 2018 were as follows:

2019 2018 Profit excluding income tax $ 449,071 493,911 Income tax using the Company's domestic tax rate $ 89,814 98,782 Undistributed earnings additional tax - 7,024 Gain on disposal of investment - (76) Dividend revenue (9,709) (8,265) Adjustment in tax rate - (2,343) Others 6,519 (3,194) Income tax expense $ 86,624 91,928

(Continued) 188 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(ii) Deferred tax assets and liabilities

1) Unrecognized deferred tax assets and liabilities

As of December 31, 2019 and 2018, the Company has no unrecognized deferred tax assets and liabilities.

2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2019 and 2018 were as follows:

Deferred tax assets:

Allowance for Allowance for impairment valuation of Defined of receivables inventories benefit plans Other Total Balance as of January 1, 2019 $ 13,085 3,914 57,843 36,415 111,257 Recognized in profit or loss (7,349) (1,579) (16,137) (7,359) (32,424) Recognized in other comprehensive income - - (9,743) - (9,743) Balance as of December 31, 2019 $ 5,736 2,335 31,963 29,056 69,090

Balance as of January 1, 2018 $ 9,298 3,381 50,362 31,926 94,967 Recognized in profit or loss 3,787 533 549 4,489 9,358 Recognized in other comprehensive income - - 6,932 - 6,932 Balance as of December 31, 2018 $ 13,085 3,914 57,843 36,415 111,257

Deferred tax liabilities:

Unrealized investment Unrealized income under foreign equity method exchange gains Total Balance as of January 1, 2019 $ (67,008) (1,780) (68,788) Recognized in profit or loss (1,090) (330) (1,420) Balance as of December 31, 2019 $ (68,098) (2,110) (70,208)

Balance as of January 1, 2018 $ (52,296) (2,031) (54,327) Recognized in profit or loss (14,712) 251 (14,461) Balance as of December 31, 2018 $ (67,008) (1,780) (68,788)

(iii) The Company's tax return for the years through 2016 were assessed and approved by the Taipei National Tax Administration.

(Continued) 189 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(p) Capital and other equity

(i) Common share

As of December 31, 2019 and 2018, the Company's authorized share capital consisted of 800,000 thousand shares of common share, with $10 dollars par value per share, of which 547,752 thousand shares, were issued and outstanding.

(ii) Capital surplus

The balance of capital surplus as of December 31, 2019 and 2018, were as follows:

December 31, December 31, 2019 2018 Cash subscription in excess of par value of shares $ 462,559 462,559 Treasury share transactions 10,999 10,999 Donation from shareholders 1,000 - $ 474,558 473,558

According to the ROC Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring paid-in capital in excess of par value should not exceed 10% of the total common stock outstanding.

(iii) Retained earnings

In accordance with the Company's article of incorporation, it stipulates that the Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance is to be appropriated as follows:

1) Legal reserve should be at 10%.

2) Special reserve should be appropriated (reversed) in accordance with related rules.

3) Remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders' meeting for approval.

In accordance with on the amendment to Company's article of incorporation, in order for the requirement of future investment and shareholders' interest, the dividend payment is not lower than 50% of net profit of current year deduct legal reserve and the payment of cash dividend should exceed 25% of total dividends.

(Continued) 190 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

1) Legal reserve

When a company incurs no loss, it may, pursuant to a resolution by a shareholders' meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

2) Special reserve

The Company adopted to exemptions of IFRS 1 First-time Adoption of International Financial Reporting Standards of first time adoption in accordance with the IFRSs approved by the FSC. Based on the exemptions, the Company increased retained earnings amounted to $132,824 thousand from reserve for revaluation increment and cumulative translation adjustments (gains). In accordance with Rule No. 1010012865 issued by the FSC on April 6, 2012, the Company shall reserve a special reserve amounted to $18,752 thousand, which is same as the increased amount at first time adoption of IFRSs. The Company shall reverse to distribute of earnings proportionately based on the prior special reserve when the related assets had been used, disposal or reclassified. As of December 31, 2019 and 2018, the special reserve is amounted to $18,646 thousand.

According to the aforementioned ruling, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal to the current- period total net reduction of other shareholders' equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve to account for cumulative changes to other shareholders' equity, and does not qualify for earnings distribution. Amounts of subsequent reversals pertaining to the net reduction of other shareholders' equity shall qualify for additional distributions.

3) Earnings distribution

Earnings distribution for 2018 and 2017 was decided by the resolution adopted, at the general meeting of shareholders held on May 30, 2019 and June 6, 2018, respectively. The relevant dividend distributions to shareholders were as follows:

2018 2017 Amount Amount per share Amount per share Amount Dividends distributed to common shareholders: Cash $ 0.50 $ 273,876 0.50 273,876

(Continued) 191 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

On March 19, 2020, the Company's Board of Directors proposed to resolve to appropriate the 2019 earnings. These earnings will be appropriated as follows:

2019 Amount per share Amount Dividends distributed to common shareholders: Cash $ 0.30 $ 164,326

(iv) Other equity (net of tax)

Unrealized gains (losses) from financial assets Exchange measured at fair differences on value through translation of other foreign financial comprehensive statements income Total Balance at January 1, 2019 $ (68,420) (81,347) (149,767) Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income - 137,460 137,460 Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income on subsidiaries accounted for using equity method - 1,395 1,395 Disposal of investments in equity instruments designated at fair value through other comprehensive income - 24,108 24,108 Exchange differences on translation of foreign financial statements (43,239) - (43,239) Exchange differences on associates accounted for using equity method (395) - (395) Balance at December 31, 2019 $ (112,054) 81,616 (30,438)

Unrealized gains (losses) from financial assets Exchange measured at fair Unrealized differences on value through gains (losses) translation of other on available- foreign financial comprehensive for-sale statements income financial assets Total Balance at January 1, 2018 $ (57,203) - 156,257 99,054 Effects of retrospective application - 166,684 (156,257) 10,427 Balance at January 1, 2018 after adjustments (57,203) 166,684 - 109,481 Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income - (231,112) - (231,112) Unrealized gains (losses) from financial assets measured at fair value through other comprehensive (16,552) income - (16,552) - Disposal of investments in equity instruments designated at fair value through other comprehensive income on subsidiaries accounted - (367) - (367) for using equity method Exchange differences on translation of foreign financial statements (11,657) - - (11,657) Exchange differences on associates accounted for using equity method 440 - - 440 Balance at December 31, 2018 $ (68,420) (81,347) - (149,767)

(Continued) 192 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(q) Earning per share

The calculation of basic earnings per share and diluted earnings per share for the years 2019 and 2018 are as follows:

2019 2018 Basic earning per share Profit attributable to common shareholders of the Company $ 362,447 401,983 Weighted-average number of common shares $ 547,752 547,752 Basic earnings per share (express in New Taiwan dollar) $ 0.66 0.73

2019 2018 Diluted earning per share Profit attributable to common shareholders of the Company $ 362,447 401,983 Weighted average number of common shares (basic) 547,752 547,752 Effect of employee compensation 1,917 1,952 Weighted-average number of common shares outstanding (diluted) 549,669 549,704 Diluted earnings per share (express in New Taiwan dollar) $ 0.66 0.73

(r) Employee compensation and directors' remuneration

In accordance with the articles of incorporation, the Company should contribute 5% of the profit as employee remuneration and a maximum of 2% as directors' remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The recipients may include the employees of the Company's affiliated companies who meet certain conditions.

For the years ended December 31, 2019 and 2018, the Company estimated its employee compensation amounting to $24,143 thousand and $26,554 thousand and directors' remuneration amounting to $9,658 thousand and $10,622 thousand, respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees and directors of each period, multiplied by the percentage of remuneration to employees and directors as specified in the Company's articles. These remunerations were expensed under operating costs or operating expenses during 2018 and 2017 for each period. Related information would be available at the Market Observation Post System website. The amounts, as stated in the parent-company-only financial statements, are identical to those of the actual distributions for 2019 and 2018.

(Continued) 193 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(s) Revenue from contract with customers

(i) Disaggregation of revenue

2019 Color Specialty Electronic chemicals chemicals chemicals Pharmaceuticals Total Primary geographical markets: Taiwan $ 472,005 254,807 715,240 7,302 1,449,354 America 283,737 336,269 - 23,275 643,281 Asia 2,778,407 814,612 181,790 41,841 3,816,650 Europe 597,865 477,358 - 77,351 1,152,574 Other 102,179 - - 39,516 141,695 $ 4,234,193 1,883,046 897,030 189,285 7,203,554 Major products: Chemicals $ 4,234,193 1,883,046 897,030 - 7,014,269 Other - - - 189,285 189,285 $ 4,234,193 1,883,046 897,030 189,285 7,203,554

2018 Color Specialty Electronic chemicals chemicals chemicals Pharmaceuticals Total Primary geographical markets: Taiwan $ 564,269 247,396 846,816 4,455 1,662,936 America 307,626 414,144 - 43,156 764,926 Asia 2,627,553 852,986 158,782 68,267 3,707,588 Europe 595,519 400,151 90 66,429 1,062,189 Other 95,209 70,572 - 42,306 208,087 $ 4,190,176 1,985,249 1,005,688 224,613 7,405,726 Major products: Chemicals $ 4,190,176 1,985,249 1,005,688 - 7,181,113 Other - - - 224,613 224,613 $ 4,190,176 1,985,249 1,005,688 224,613 7,405,726

(ii) Contract balance

December 31, December 31, January 1, 2019 2018 2018 Receivables $ 1,260,082 1,436,693 1,548,403 Less: loss allowance (35,889) (43,528) (68,394) Total $ 1,224,193 1,393,165 1,480,009 For the detail on receivable and allowance, please reefer to Note 6(c).

(Continued) 194 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(t) Non-operating income and expenses

(i) Other income

2019 2018 Interest income $ 1,585 1,979 Dividend income 49,939 42,704 $ 51,524 44,683

(ii) Other gains and losses

2019 2018 Foreign exchange gains $ 5,989 6,028 Net gains on disposal of financial assets and liabilities at fair value through profit or loss 23 14 Gains on disposal of property plant and equipment 863 562 Subsidy revenue 10,620 4,921 Others 59,610 55,287 $ 77,105 66,812

(iii) Finance costs

2019 2018 Interest expense $ 62,243 60,234

(u) Financial instruments

(i) Credit risk

1) Credit risk exposure

As of December 31, 2019 and 2018, the Company's exposure to credit risk and the maximum exposure were mainly from:

a) The carrying amount of financial assets recognized in the balance sheet; and

b) The amounts of liabilities as a result from the Company providing financial guarantees were $59,960 thousand and $61,430 thousand , respectively.

(Continued) 195 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

2) Concentration of credit risk

The Company has exposure to credit risk of individual counterparty or group of counterparties with similar credit characteristics. Those related parties of which having transactions with the Company are regarded as group of counterparties with similar credit characteristics. The concentrations of credit risk on notes and accounts receivables due from subsidiaries resulted that the Company distributed product through subsidiaries. Please refer to Note 7.

3) Receivables and debt securities

For credit risk exposure of receivables, please refer Note 6(c).

Other financial assets at amortized cost includes other receivables and refundable deposits. There were no loss allowance provision for the years ended December 31, 2019 and 2018. All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses. (Regarding how the financial instruments are considered to have low credit risk, please refer to Note 4(f).

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, including estimated interest payable and excluding the impact of netting agreements.

Carrying Contractual within Over 5 amount cash flows 1 year 1~2 years 2~5 years years December 31, 2019 Non-derivative financial liabilities Short-term borrowings $ 1,717,630 1,721,048 1,721,048 - - - Notes payable 151,828 151,828 151,828 - - - Accounts payable 203,515 203,515 203,515 - - - Other payable 156,412 156,412 156,412 - - - Payables on equipment 8,712 8,712 8,712 - - - Lease liabilities 47,120 48,941 10,805 9,747 24,941 3,448 Long-term borrowings (including current portion) 1,379,748 1,406,999 433,040 369,737 604,222 - $ 3,664,965 3,697,455 2,685,360 379,484 629,163 3,448

(Continued) 196 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

Carrying Contractual within Over 5 amount cash flows 1 year 1~2 years 2~5 years years December 31, 2018 Non derivative financial liabilities Short-term borrowings $ 1,793,260 1,797,623 1,797,623 - - - Notes payable 190,752 190,752 190,752 - - - Accounts payable 348,899 348,899 348,899 - - - Other payable 238,693 238,693 238,693 - - - Payables on equipment 31,293 31,293 31,293 - - - Long-term borrowings (including current portion) 1,598,988 1,637,749 141,977 1,192,796 302,976 - $ 4,201,885 4,245,009 2,749,237 1,192,796 302,976 -

The Company does not expect the cash flows included in the maturity analysis to occur significantly earlier or at significantly different amounts.

(iii) Currency risk

1) Exposure to foreign currency risk

The Company's significant exposure to foreign currency risk was as follows:

December 31, 2019 December 31, 2018 Foreign Exchange Foreign Exchange currency rate TWD currency rate TWD Financial assets Monetary items USD $ 24,200 29.98 725,516 24,336 30.72 747,602 JPY 214,664 0.28 60,106 300,696 0.28 84,329 RMB 66,208 4.31 284,694 62,657 4.47 280,077 Non-monetary items JPY 423,000 0.28 118,440 200,900 0.28 55,890 Financial liabilities Monetary items USD 28,027 30.00 840,810 40,199 30.74 1,235,717 JPY 24,802 0.28 6,945 23,184 0.28 6,492 RMB 1,792 4.33 7,759 5,651 4.50 25,192

2) Sensitivity analysis

The Company's exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, account receivable, and trade payable that are denominated in foreign currency. A strengthening (weakening) 1% of appreciation (depreciation) of the NTD against the USD, JPY, and RMB for the year ended December 31, 2019 and 2018, would have changed the profit by $1,718 thousand and $851 thousand, respectively, and other comprehensive income by $1,184 thousand and $559 thousand, respectively. The analysis is performed on the same basis for 2019 and 2018.

(Continued) 197 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

3) Foreign exchange gains and losses on monetary items

Since the Company has many kinds of functional currency, the information on foreign exchange gains (losses) on monetary items is disclosed by total amount. For the years 2019 and 2018, foreign exchange gains (losses) (including realized and unrealized portions) are exchange losses amounted to $5,989 thousand and $6,028 thousand, respectively.

(iv) Interest rate analysis

Please refer to the notes on liquidity risk management and interest rate exposure of the Company's financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of non- derivative financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is based on the assumption that the amount of assets outstanding at the reporting date was outstanding throughout the year. The rate of change is expresses as the interest rate increase or decreases by 1% when reporting to management internally, which also represents the Company management's assessment of the reasonably possible interest rate change.

If the interest rate had increased/decreased by 1%, the Company's profit would have decreased/increased by $24,779 thousand and $27,138 thousand, respectively, for the year ended December 31, 2019 and 2018, with all other variable factors that remain constant. This is mainly due to the Company's borrowing at floating rates.

(v) Other market price risk

For the year ended December 31, 2019 and 2018, the sensitivity analyses for the changes in the securities price at the reporting date were performed using the same basis for the profit and loss as illustrated below:

2019 2018 Other Other Prices of securities comprehensive comprehensive at the reporting date income after tax Net income income after tax Net income Increasing 1% $ 10,314 - 9,674 - Decreasing 1% $ (10,314) - (9,674) -

(Continued) 198 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(vi) Fair value of financial instruments

1) Categories and fair values of financial instruments

The fair value of financial assets and liabilities at fair value through profit and loss and financial assets at fair value through other comprehensive income is measured on a recurring basis. The carrying amount and fair value of the Company's financial assets and liabilities, including the information on fair value hierarchy were as follows, however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and for equity investments that has no quoted prices in the active markets and whose fair value cannot be reliably measured, disclosure of fair value information is not required:

December 31, 2019 Fair value Carrying amount Level 1 Level 2 Level 3 Total Financial assets mandatorily measured at fair value through profit or loss Monetary market fund $ 30,023 30,023 - - 30,023 Financial assets at fair value through other comprehensive income Stocks listed on domestic and foreign markets 974,607 974,607 - - 974,607 Domestic unlisted common shares 56,764 - - 56,764 56,764 Subtotal 1,031,371 974,607 - 56,764 1,031,371 Financial assets measured at amortized cost Cash and cash equivalents 544,683 - - - - Notes and account receivable (included related parties) 1,224,193 - - - - Other financial assets (included other receivables-related parities) 60,915 - - - - Subtotal 1,829,791 - - - - Total $ 2,891,185 1,004,630 - 56,764 1,061,394 Financial liabilities measured at amortized cost Bank loans $ 3,097,378 - - - - Notes and trade payable 355,343 - - - - Other payable 156,412 - - - - Lease liabilities 47,120 - - - - Payables on equipment 8,712 - - - - Subtotal 3,664,965 - - - - Total $ 3,664,965 - - - -

(Continued) 199 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

December 31, 2018 Fair value Book value Level 1 Level 2 Level 3 Total Financial assets at fair value through other comprehensive income Stocks listed on domestic and $ 881,736 881,736 - - 881,736 foreign markets Domestic unlisted common 85,632 - - 85,632 85,632 shares Subtotal 967,368 881,736 - 85,632 967,368 Financial liabilities measured at amortized cost Cash and cash equivalents 511,695 - - - - Notes and account receivable (included related parties) 1,393,165 - - - - Other financial assets (included other receivables-related parities) 34,027 - - - - Subtotal 1,938,887 - - - - Total $ 2,906,255 881,736 - 85,632 967,368 Financial liabilities measured at amortized cost Bank loans $ 3,392,248 - - - - Notes and trade payable 539,651 - - - - Other payable 238,693 - - - - Payables on equipment 31,293 - - - - Total $ 4,201,885 - - - -

2) Valuation techniques for financial instruments measured at fair value

a) Non-derivative instruments

The fair value of financial instruments traded in an active market is based on the quoted market prices. The quotations, which is published by the main exchange center, is included in the fair value of the listed securities instruments in an active market with open bid.

A financial instrument is regarded as the quoted price in an active market if the quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency; and if those prices represent the actual and regularly occurring market transactions on an arm's length basis. Otherwise, the market is deemed to be inactive. Normally, a market is considered to be inactive as follows:

i) the bid-ask spread is increasing; or

ii) the bid-ask spread varies significantly; or

iii) there has been a significant decline in trading volume.

(Continued) 200 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

When the financial instrument of the Company is traded in an active market, its fair value is illustrated by the category and nature as follows:

 The fair value of stocks listed on domestic and foreign markets, which are the financial assets with standard terms and conditions and traded in an active market, are based on the market closing prices.

Except the aforementioned financial instruments, with active market the others' fair value is based on valuation techniques. Fair value, measured by using valuation technique that can be extrapolated from either similar financial instruments or discounted cash flow method or other valuation techniques, including models, is calculated based on available market data at the reporting data.

When the financial instrument of the Company is traded in an inactive market, its fair value is illustrated by the category and nature as follows:

 Unquoted equity instruments: the fair value of financial instruments transactions in an inactive market, which is valued by comparable method. The main hypothesis is referred from the quotations of comparable listed companies and earning multiplies of PBR proportion as basic, which is adjusted by the discount affections of equity securities lacking market liquidity.

b) Derivative financial instruments

Measurement of the fair value of derivative instruments is based on the valuation techniques generally accepted by market participants such as the discounted cash flow or option pricing models. Fair value of forward currency is usually determined by the forward currency exchange rate.

3) Transfers between Level 1 and Level 2

The Company didn't have any fair value transfer between levels for the years ended December 31, 2019 and 2018.

4) Reconciliation of Level 3 fair values

Fair value through other comprehensive income Unquoted equity instruments Balance on adjustment January 1, 2019 $ 85,632 Total gains or losses: Recognized in other comprehensive income (28,868) Balance on December 31, 2019 $ 56,764

Balance on adjustment January 1, 2018 $ 86,369 Total gains or losses: Recognized in other comprehensive income (737) Balance on December 31, 2018 $ 85,632

(Continued) 201 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

The aforementioned total gains or losses were included “ unrealized gains (losses) on equity investment measured at fair value through other comprehensive income”, which related to holding assets on December 31, 2019 were as follows:

2019 2018 Recognized in other comprehensive income $ (28,868) (737)

5) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Company's financial instruments that use Level 3 inputs to measure fair value were “ financial assets measured at fair value through other comprehensive income – debt investments”.

Most of the Company's financial instruments that use level 3 inputs to measure fair value have multiple significant unobservable inputs. There is no correlation existence among the significant unobservable inputs of equity investments that have no active markets because they were independent of each other.

Quantified information of significant unobservable inputs was as follows:

Inter-relationship between significant unobservable inputs and fair value Item Valuation technique Significant unobservable inputs measurement Financial assets at fair Comparable Listed  Price-Book Ratio (as of December 31,  The estimated fair value would value through other companies approach 2019 and 2018 were 3.57 and 3.77, increase if the multiplier was comprehensive respectively) higher. income- equity  Market liquidity discount (as of  The estimated fair value would investments without rate decrease if market liquidity an active market December 31, 2019 and 2018 were all 20%) discount rate was higher. 6) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

The Company's measurements of financial instruments' fair value were reasonable, only if using different variables leading different results. For the fair value measurements in level 3, if changing valuation variables, would have the following effects on other comprehensive income on December 31, 2019:

Fair value variation on other comprehensive income Upwards or Favorable Unfavorable December 31, December 31, December 31, December 31, Inputs Downwards 2019 2018 2019 2018

Price-book ratio 5% 2,176 4,152 (2,176) (4,152)

Market liquidity discount rate 5% 2,949 4,384 (2,949) (4,384)

The favorable and unfavorable effects represent the changes in fair value, and fait value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the inter-relationships with another input.

(Continued) 202 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(v) Financial risk management

(i) Overview

The Company have exposures to the following risks from its financial instruments:

1) Credit risk

2) Liquidity risk

3) Market risk

Detailed information about exposure risk arising from the aforementioned risk and the Company's objective, policies and process for managing risks have been stated below. Further quantitative disclosures have been disclosed as notes to the parent-company-only financial statements.

(ii) Structure of risk management

The Company's inter departmental management and committee, which consists of general manager and managers from all departments, including manufacturing, research and development, environment, health and safety, financial and audit, is responsible to hold a meeting regularly for monitoring the Company's risk management policies.

The executive and responsible departments of risk management are as follows:

1) Financial risk, liquidity risk, credit risk and legal risk: based on regulations, government policy and analysis of market change, financial division and legal division make the strategy to reflect, then execute the strategy. The internal auditor reviews the risks control and procedures for the aforementioned risks.

2) Market risk: the Company's SBUs and functional division are responsible to make the strategy to identify risk based on regulation, government policy and analysis of market change, then execute the strategy. In order to manage the risk of market change dramatically, management with SBUs managers will establish a task force when it is necessary.

3) Operating strategy risk: in order to monitor the operating strategy in compliance with the Company's vision and meet the operating goals, general manager division with management of SBUs will evaluate the risk of operational policy through performance evaluation periodically.

The Company's Audit Committee oversees how management monitors counterparty with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company's Audit Committee is assisted in its oversight role by the internal auditor. The internal auditor undertakes both regular and exceptional reviews of risk management controls and the procedures, and the result of which are reported to the Audit Committee.

(Continued) 203 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to financial instruments fails to meet it contractual obligations that arises principally from the Company's accounts receivable and investments in securities.

1) Account receivable and other receivable

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. According to the credit policy, the Company analyze each new customer individually for their credit worthiness before granting the new customer standard payment terms. Credit lines are established for each customer and reviewed periodically.

The Company did not have any collateral or other enhancements to avoid credit risk of financial assets.

2) Investments

The credit risk exposure in the bank deposits, and equity instruments are measured and monitored by the Company's finance department. Since the Company's transactions resulted from the external parties with good credit standing highly rated financial institutions, publicly-traded stock companies and unlisted companies with good reputation, there are no incompliance issues and therefore no significant credit risk.

3) Guarantees

The Company's policy is to provide financial guarantees only to wholly owned subsidiaries. As of December 31, 2019 and 2018, the outstanding balance of guarantees were $59,960 thousand and $61,430 thousand, respectively.

(iv) Liquidity risk

The Company manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company's management supervises the banking facilities and ensures compliance with the terms of loan agreements.

Loans and borrowings from the bank form an important source of liquidity for the Company. As of December 31, 2019 and 2018, the Company's unused credit line were amounted to $2,484,334 thousand and $2,173,130 thousand, respectively.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

(Continued) 204 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

The Company buys and sells derivatives, and also incurs financial liabilities, in order to manage market risk. All such transactions are carried out within the guidelines of derivative transaction management set by the board of directors and general meeting of shareholders and the related financial transactions are under oversight by internal auditor. The management of the Company's market risk are as follows:

1) Currency risk

The Company is exposed to currency risk on foreign currency assets and liabilities resulted from operating, financing and investing activities. The Company hedges the currency risk by derivatives. Most of the foreign exchange gains and losses arising from foreign currency assets and liabilities will be offset by the gains or losses on derivative instruments. The Company may reduce the currency risk through derivative instruments but do not avoid all of the currency influence resulted from foreign currency exchange.

The Company monitors the exposure of individual foreign currency assets and liabilities periodically. When necessary, the Company uses foreign currency options and forward exchange contracts to hedge above currency risk exposure. The duration of foreign currency options and forward exchange contracts are within one year and do not meet the criteria for hedge accounting.

2) Interest rate risk

The Company's exposure of interest rate risk is mainly from floating-rate loans. Any change in interest rates will cause influence in the effective interest rates of loans and thus cause the alternation of future cash flows. The Company enters into and designates interest rate swaps and other capital market financing as hedges of the variability in cash flows by continuing to review the interest rate variability in order to control the financial cost at the relatively low in market interest rate.

3) Other market price risk

The Company is exposed to equity price risk due to the investments in equity securities. This is a strategic investment and is not held for trading. The Company does not actively trade in these investments Material investments within the portfolio are managed on an individual basis, and all buy-and-sell decisions are approved by the Board of directors.

(w) Capital management

The Board's policy is to keep a strong capital base in order to maintain investor, creditor and market confidence, and to sustain future development of the business. Capital consists of common shares, capital surplus, retained earnings and other equity of the Company. The Board of Directors monitors the return on capital as well as the level of dividends to common shareholders.

(Continued) 205 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

December 31, December 31, 2019 2018 Total liabilities $ 4,134,337 4,784,125 Less: cash and cash equivalents 554,683 511,695 Net liabilities $ 3,579,654 4,272,430 Total equity $ 7,823,140 7,599,139 Debt-to-equity ratio %46 %56

There were no change in the Company's approach to capital management for the year ended December 31, 2019.

(x) Investing and financing activities not affecting current cash flow

Reconciliation of liabilities arising from financing activities were as follows:

Non-cash changes January 1, December 31, 2019 Cash flows Other 2019 Short-term borrowings $ 1,793,260 (75,630) - 1,717,630 Lease liabilities 55,463 (10,145) 1,802 47,120 Long-term borrowings 1,598,988 (220,000) 760 1,379,748 Total liabilities from financing activities $ 3,447,711 (305,775) 2,562 3,144,498

Non-cash changes January 1, December 31, 2018 Cash flows Other 2018 Short-term borrowings $ 1,374,847 418,413 - 1,793,260

Long-term borrowings 1,798,228 (200,000) 760 1,598,988

Total liabilities from financing activities $ 3,173,075 218,413 760 3,392,248

(7) Related-party transactions:

(a) Parent company and ultimate controlling company

The Company is the ultimate controlling party of the Company and its subsidiaries.

(b) Names and relationship with related parties

The following are entities that have had transactions with related party during the periods covered in the parent-company-only financial statements.

Name of related party Relationship with the Company EVERLIGHT USA, INC. (EVUS) Subsidiary EVERLIGHT (HONG KONG) LIMITED (EVHK) Subsidiary EVERLIGHT CHEMICALS (SINGAPORE) PTE LTD. (EVSG) Subsidiary EVERLIGHT EUROPE B.V. (EVEU) Subsidiary TREND TONE IMAGING, INC. (TTI) Subsidiary ELITE FOREIGN TRADING INCORPORATION (ELITE) Subsidiary DAILYCARE BIOMEDICAL INC. (DCBM) Subsidiary

(Continued) 206 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

Name of related party Relationship with the Company ETHICAL INTERNATIONAL TRADING & WAREHOUSING Subsidiary (SHANGHAI) CO.,LTD. (ETSH) GUANGZHOU ETHICAL TRADING CO., LTD. (ETGZ) Subsidiary SHANGHAI EVERLIGHT TRADING CO., LTD. (EVSH) Subsidiary EVERLIGHT (SUZHOU) ADVANCED CHEMICALS LTD. (EVSZ)Subsidiary ANDA SEMI CONDUCTOR TECHNOLOGY (SUZHOU) Subsidiary CO., LTD. (ANDA) GREATLIGHT INVESTMENT CORPORATION (GLTP) Subsidiary SHANGHAI ANDA INTERNATIONAL TRADING CO., LTD. Subsidiary (ADSH) 3E CHEMICAL (SUZHOU) CO., LTD. (3ESZ) Affiliate company CHUNG HWA CHEMICAL INDUSTRIAL WORKS, LTD. The entity's chairman is the director of (CHCIW) the Company KEYSTONE PHARMACEUTICALS INC. (KEYSTONE) Affiliate company (c) Significant transactions with related parties

(i) Operating revenue

Significant sales to related parties of the Company were as follow:

2019 2018 Subsidiary $ 2,480,677 2,560,174

The payment terms for related parties, except EVUS and ELITE are Open Account 100 days and Open Account 90 days, respectively, are same as those of the third-parties sales. There was no collateral on the accounts receivable from related parties. The Company did not recognized allowance of impairment after considerations.

(ii) Purchase

The amounts of significant purchases by the Group from related parties were as follows:

2019 2018 Other related parties $ 36,439 35,957

The prices, payment terms and other terms and conditions of purchase transactions with related parties were not materially different from those of the third-party vendors.

(iii) Other

1) The Company had provided a guarantee for loans taken out by related parties were as follows:

December 31, December 31, 2019 2018 EVUS $ 59,960 61,430

(Continued) 207 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

2) As of December 31, 2019 and 2018, other receivables of dividends from subsidiaries were $35,181 thousand and $0 thousand, respectively.

3) As of December 31, 2019 and 2018, other receivables of prepayments for subsidiaries were $4,691 thousand and $5,980 thousand, respectively.

4) As of December 31, 2019 and 2018, other payables of prepayments for subsidiaries were $3,396 thousand and $6,191 thousand, respectively.

(iv) Receivable from related parties

The Company's receivable from related parties were as follows:

December 31, December 31, Account Name of Entity 2019 2018 Account receivable from related parties, net EVUS $ 60,910 143,218 Other receivables EVEU 62,345 79,014 Elite 116,576 107,255 Other subsidiaries 210,768 210,090 450,599 539,577 Other receivable from Subsidiaries related parties 39,872 5,980 $ 490,471 545,557

(v) Payable from related parties

The Company's payable from related parties were as follows:

December 31, December 31, Account Name of Entity 2019 2018 Notes and accounts payable Other related parties $ 11,829 11,270 Other payables Subsidiaries 3,396 6,191 $ 15,225 17,461

(vi) Property transactions

In 2019, the Company purchased machinery equipment from the affiliate company amounting to $6,600 thousand. As of December 31, 2019, the payment has been paid.

(d) Key management personnel compensation

2019 2018 Short-term employee benefits $ 28,350 26,360 Post-employment benefits 904 834 $ 29,254 27,194

(Continued) 208 EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(8) Pledged assets: None.

(9) Commitments and contingencies:

(a) The Company's unrecognized contractual commitment are as follows:

December 31, December 31, 2019 2018 Acquisition of property, plant and equipment $ 103,172 329,585

(b) The Company's outstanding standby letter of credit are as follows:

December 31, December 31, 2019 2018 Outstanding standby letter of credit $- 306

(10) Losses due to major disasters: None.

(11) Subsequent events: None.

(12) Other:

(a) A summary of employee benefits, depreciation, and amortization, by function, is as follows:

By function 2019 2018 By item Operating Operating Operating Operating costs expenses Total costs expenses Total Employee benefits Salary 586,295 401,201 987,496 607,261 406,514 1,013,775 Labor and health insurance 59,877 38,182 98,059 59,282 37,308 96,590 Pension 29,269 23,232 52,501 31,287 24,073 55,360 Remuneration of directors - 18,717 18,717 - 19,698 19,698 Others 28,736 14,386 43,122 28,299 13,608 41,907 Depreciation 397,835 105,909 503,744 365,744 98,758 464,502 Depletion ------Amortization) 226 18,026 18,252 335 11,700 12,035

As of December 31, 2019 and 2018, the additional information for employee numbers and employee benefits were as follows:

2019 2018 Average employee numbers 1,402 1,403 Average directors numbers without serving concurrently as employee 9 9 Average employee benefits $ 848 866 Average employee salaries $ 709 727 Average adjustment rate of employee salaries (2.48)%

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ĩńŰůŵŪůŶŦťĪ EVERLIGHT CHEMICAL INDUSTRIAL CORPORATION Notes to the Parent-Company-Only Financial Statements

(14) Segment information:

Please see the consolidated financial statements for the year ended December 31, 2019.

214

Everlight Chemical Industrial Corporation

Chairman Chen, Chien-Hsin